The 4 Parts of Medicare Explained

What Is Medicare?

Medicare is the federal health insurance program for Americans 65 and older, as well as certain younger people with disabilities or specific medical conditions. But Medicare is not one single plan — it is divided into four distinct parts, each covering a different set of services.

Understanding how these parts work together is one of the most important steps in making sure you have the right coverage. Let's break down each one.

Part A: Hospital Insurance

Medicare Part A covers inpatient care — the kind of treatment that requires you to be formally admitted to a hospital or facility.

What Part A covers:

• Inpatient hospital stays (semi-private room, meals, nursing care, medications administered during your stay)
• Skilled nursing facility care (up to 100 days per benefit period, following a qualifying 3-day hospital stay)
• Hospice care for terminally ill patients
• Some home health care services (part-time skilled nursing, physical therapy, occupational therapy)

What Part A costs in 2025:

Most people pay nothing for Part A. If you or your spouse paid Medicare taxes for at least 10 years (40 quarters), your premium is $0.

If you don't qualify for premium-free Part A:

• 30-39 quarters of work history: $285 per month
• Fewer than 30 quarters: $518 per month

Even with premium-free Part A, there are out-of-pocket costs when you use services:

• Hospital deductible: $1,676 per benefit period
• Days 1-60 in the hospital: $0 after the deductible
• Days 61-90: $419 per day
• Lifetime reserve days (60 total): $838 per day
• Skilled nursing facility, days 21-100: $209.50 per day

A benefit period starts the day you are admitted as an inpatient and ends when you have been out of the hospital or skilled nursing facility for 60 consecutive days. If you are admitted again after that, a new benefit period begins — and so does a new deductible.

Part B: Medical Insurance

If Part A is for the hospital, Part B is for everything else on the medical side. It covers the doctors, tests, and outpatient services that keep you healthy day to day.

What Part B covers:

• Doctor visits and specialist consultations
• Outpatient surgeries and procedures
• Diagnostic tests and lab work
• Preventive services (annual wellness visits, screenings, flu shots, COVID-19 vaccines)
• Durable medical equipment (wheelchairs, walkers, oxygen equipment)
• Mental health services (outpatient)
• Ambulance services
• Some prescription drugs administered in a clinical setting (such as chemotherapy infusions)

One of the most valuable features of Part B is its preventive care coverage. Most preventive services — including your annual "Welcome to Medicare" visit, mammograms, colonoscopies, and depression screenings — are covered at no cost to you when your provider accepts Medicare assignment.

What Part B costs in 2025:

• Standard monthly premium: $185.00
• Annual deductible: $257
• After the deductible: you typically pay 20% of the Medicare-approved amount

Unlike Part A, everyone pays a Part B premium. And if your income is above certain thresholds, you will pay more. This is called IRMAA — the Income-Related Monthly Adjustment Amount. It is based on your tax return from two years prior (so your 2023 income determines your 2025 premium).

For individuals earning above $106,000 or couples above $212,000, Part B premiums range from $259.00 to $628.90 per month.

Important: If you do not sign up for Part B when you are first eligible and do not have qualifying employer coverage, you may face a late enrollment penalty. Your premium increases by 10% for each full 12-month period you could have had Part B but did not enroll — and that penalty lasts for as long as you have Part B.

Part C: Medicare Advantage

Medicare Advantage is not a separate benefit — it is an alternative way to receive your Part A and Part B coverage. Instead of getting benefits directly from the federal government (Original Medicare), you enroll in a plan offered by a private insurance company that is approved by Medicare.

Think of it this way: Original Medicare (Parts A and B) is the government plan. Medicare Advantage (Part C) is the private plan option that replaces it.

How Medicare Advantage works:

• Plans must cover everything that Original Medicare covers (except hospice, which stays under Part A)
• Most plans also include Part D prescription drug coverage
• Plans use provider networks — typically HMO or PPO structures
• HMO plans generally require referrals to see specialists; PPO plans usually do not
• Every Medicare Advantage plan has an annual out-of-pocket maximum, which Original Medicare does not have

Extra benefits you won't find in Original Medicare:

This is where Medicare Advantage stands out. More than 97% of Medicare Advantage plans offer benefits beyond what Original Medicare provides, including:

• Routine dental care (exams, cleanings, and sometimes major work)
• Vision coverage (eye exams, glasses, contacts)
• Hearing coverage (exams, hearing aids)
• Fitness programs (such as SilverSneakers gym memberships)
• Transportation to medical appointments
• Over-the-counter (OTC) drug allowances
• Telehealth services

What Part C costs in 2025:

• Many plans have $0 monthly premiums (you still pay your Part B premium)
• Copays, deductibles, and coinsurance vary by plan
• Maximum out-of-pocket for in-network services: $9,350 (many plans set lower limits)
• Costs and available plans depend on where you live

The trade-off: Medicare Advantage plans can save you money and offer extra benefits, but they come with network restrictions. You may need to use in-network doctors and hospitals, and some services may require prior authorization. With Original Medicare, you can see any provider in the country that accepts Medicare.

To enroll in Medicare Advantage, you must:

• Have both Medicare Part A and Part B
• Live in the plan's service area

Part D: Prescription Drug Coverage

Medicare Part D helps cover the cost of outpatient prescription drugs — the medications you pick up at a pharmacy or receive by mail order. Part D is offered by private insurance companies approved by Medicare.

You can get Part D coverage in two ways:

1. A standalone Part D plan (paired with Original Medicare)
2. A Medicare Advantage plan that includes drug coverage (most do)

What Part D covers:

Every Part D plan has a formulary — a list of covered medications organized into cost tiers. Lower-tier drugs (typically generics) cost less; higher-tier drugs (brand-name or specialty medications) cost more.

Plans must cover all or substantially all drugs in six protected classes: anticonvulsants, antidepressants, antineoplastics (cancer drugs), antipsychotics, antiretrovirals (HIV/AIDS drugs), and immunosuppressants.

Two major wins for consumers thanks to the Inflation Reduction Act:

• Insulin is capped at $35 per month
• All recommended adult vaccines are covered at $0

What Part D costs in 2025 — big changes this year:

2025 brought the most significant Part D changes in the program's history.

• Maximum annual deductible: $590 (varies by plan; some have $0)
• Average monthly premium: approximately $46.50 (varies widely)
• NEW: $2,000 annual out-of-pocket cap

The $2,000 cap is the headline change. Before 2025, there was no hard limit on what you could spend on prescription drugs. Now, once your out-of-pocket costs (deductibles, copays, and coinsurance) reach $2,000, you pay $0 for covered drugs for the rest of the year. This effectively eliminates the coverage gap — commonly known as the "donut hole" — that previously left many seniors paying thousands more for their medications.

How the coverage phases now work:

1. Deductible phase: You pay full price until you meet your plan's deductible (up to $590)
2. Initial coverage phase: You pay 25%; your plan pays 65%; drug manufacturers cover 10%
3. Catastrophic phase: After $2,000 out-of-pocket, you pay $0 for covered drugs

NEW: Medicare Prescription Payment Plan

Starting in 2025, all Part D plans must offer a payment plan option. Instead of paying large out-of-pocket costs upfront at the pharmacy, you can spread those costs into smaller monthly installments over the remainder of the year. There is no interest or extra fee — it simply smooths out your payments so a single expensive prescription does not hit your budget all at once.

Late enrollment penalty: If you go 63 or more consecutive days without Part D or other creditable drug coverage after your initial enrollment period, you may pay a permanent penalty added to your monthly premium.

How the Parts Work Together

Here is the simplest way to think about it:

Option 1: Original Medicare + standalone Part D

• Part A (hospital) + Part B (medical) + Part D plan (drugs)
• You can see any provider in the country that accepts Medicare
• No annual out-of-pocket maximum
• Many people add a Medigap (Medicare Supplement) policy to help cover the 20% coinsurance and deductibles

Option 2: Medicare Advantage (Part C)

• One plan from a private insurer that includes Part A + Part B + usually Part D
• Extra benefits (dental, vision, hearing, fitness)
• Annual out-of-pocket maximum
• Must use the plan's network of providers

Neither option is universally better — the right choice depends on your health needs, the doctors you want to see, the medications you take, and your budget.

Key Enrollment Periods to Know

Missing an enrollment window can mean gaps in coverage or permanent penalties. Here are the dates that matter:

Initial Enrollment Period (IEP): The 7-month window around your 65th birthday — starting 3 months before your birth month and ending 3 months after. This is when you first sign up for Parts A and B.

Annual Open Enrollment (October 15 - December 7): The annual window to join, switch, or drop a Medicare Advantage or Part D plan. Changes take effect January 1.

Medicare Advantage Open Enrollment (January 1 - March 31): If you are already in a Medicare Advantage plan, you can switch to a different plan or return to Original Medicare during this period.

General Enrollment Period (January 1 - March 31): If you missed your IEP for Part A or B, you can sign up during this window. Coverage starts the month after enrollment, and late penalties may apply.

The Bottom Line

Medicare is not one-size-fits-all. The four parts give you flexibility, but that flexibility also means you have decisions to make. The most important thing you can do is understand what each part covers, when to enroll, and how the costs work — so you are not caught off guard by a gap in coverage or an unexpected bill.

If you are approaching 65 or helping a family member navigate Medicare for the first time, start by marking your Initial Enrollment Period on the calendar. That single window sets the tone for your entire Medicare experience.