What Are the Different Parts of Medicare?
The four basic parts of Medicare are A, B, C, and D. Medicare Supplement Plans have ten plan options also identified with letters. Each part of Medicare covers different services, allowing beneficiaries to select the necessary coverages. Here are the key Medicare parts explained:
- Part A: Hospital Insurance, which covers hospital-related care
- Part B: Medical Insurance, which covers outpatient care
- Part C: Medicare Advantage, a private alternative to Original Medicare
- Part D: Optional prescription drug coverage for people with Medicare
- Medigap: Optional supplement for Original Medicare (Part A and Part B)
These components, sometimes referred to as the alphabet soup of Medicare, can be confusing. In a recent survey, 80% of Medicare-eligible individuals could not identify the program’s basic components and what they do. Read on to learn how each of these parts operates and how they can help you stay healthy.
Table of Contents
How Every Part of Medicare Works Together
Together, Part A and Part B comprise Original Medicare, the traditional Medicare program run by the federal government. The two Medicare parts work together to cover beneficiaries’ health needs.
Part D is an optional component that adds prescription drug coverage. This part is important because Original Medicare does not cover prescription drugs, except those used while in inpatient care or in a skilled nursing facility.
Medicare Part C, also known as Medicare Advantage, is an alternative to the Original Medicare program. It combines Part A, Part B, and often Part D into a single plan. Private insurance companies sell these bundled plans.
Medigap is an optional supplement that complements Original Medicare’s Part A and Part B coverage. It helps beneficiaries control their out-of-pocket health costs.
In general, Medicare eligible individuals typically choose between Original Medicare coupled with Part D and Medigap to cover extra costs and Medicare Advantage, which typically combines all of these coverages into one plan.
Medicare Part A
Medicare Part A, also known as Hospital Insurance, is the part of Medicare that covers inpatient hospital care and some related services. Along with Part B, it makes up Original Medicare.
People generally become eligible for Medicare Part A when they turn 65. Some people get Part A before 65 because they receive Social Security disability benefits, have ALS (Lou Gehrig’s disease), or have end-stage renal disease.
What Part A Covers
Medicare Part A helps pay for services associated with inpatient care in a hospital. This includes the services and supplies provided during the stay, such as medications and general nursing. It also covers a semi-private room and meals.
This part of Medicare covers other related services, such as short-term skilled nursing facility care after being released from the hospital. It also covers part-time home health services. For beneficiaries with terminal illnesses, Part A covers hospice care.
Part A Costs
Most Medicare-eligible people don’t need to pay a monthly premium for Part A because they (or their spouse) paid Medicare taxes while working for at least 10 years. After meeting Part A’s $1,600 deductible, beneficiaries generally pay a share of the cost of the services they receive. This share varies depending on the service.
Medicare Part B
Medicare Part B, also known as Medical Insurance, covers outpatient health services. It helps pay for beneficiaries’ care in doctor’s offices, clinics, and hospital outpatient departments.
Like the other half of Original Medicare, Part B is available to people who are either 65 or older, or those younger than 65 who are receiving disability benefits or living with ALS or End-Stage Renal Disease.
What Part B Covers
Part B covers a wide range of medically necessary services used to diagnose, treat, or prevent health conditions. Some of the key services covered under this part include:
- Doctor services
- Laboratory tests
- Imaging tests, such as CT scans and MRIs
- Durable medical equipment
- Ground or air ambulance transportation
- Emergency department visits
- Outpatient surgeries
- Outpatient mental health services
Part B Costs
People with Medicare pay a monthly premium for Part B. The standard premium is $164.90, but higher-income people pay more. This part of Medicare has a $226 annual deductible, and after meeting the deductible, beneficiaries generally pay 20% of the cost of each Part B service they receive.
Medicare Supplement Insurance, or Medigap
Medicare Supplement Insurance is an optional policy that complements Original Medicare. It helps pay for some of the costs that Original Medicare does not, such as deductibles, copayments, and coinsurance.
In most of the country, private insurance companies are allowed to sell ten standardized Medigap policies. Each policy is labeled with a letter, specifically D, F, G, K, L, M, or N, and covers a specific set of benefits. Keep in mind that standardized policies are different if you live in Massachusetts, Minnesota, or Wisconsin.
Eligibility for Medigap begins when a person is both 65 years old and enrolled in Medicare Part B. Some states extend eligibility to Medicare beneficiaries under 65.
What Medigap Covers
The coverage attributed to Medigap plans depends on the variety of plan you purchase. They include:
- Plan A: Basic benefits including Medicare Part A and B coinsurance/copayment and hospice care coinsurance/copayment.
- Plan B: All benefits of Plan A plus coverage for Medicare Part A deductible and skilled nursing facility care coinsurance.
- Plan C: All benefits of Plan B plus coverage for Part B excess charges and foreign travel emergency.
- Plan D: All benefits of Plan B plus coverage for skilled nursing facility care coinsurance, Part A deductible, and foreign travel emergency.
- Plan F: All benefits of Plan C plus coverage for Part B deductible and excess charges, and foreign travel emergency.
- Plan G: All benefits of Plan F except for Part B deductible, plus coverage for skilled nursing facility care coinsurance and foreign travel emergency.
- Plan K: Covers 50% of Medicare Part A and B coinsurance/copayment, blood, hospice care, and skilled nursing facility care coinsurance.
- Plan L: All benefits of Plan K plus coverage for 75% of Part A and B deductibles.
- Plan M: All benefits of Plan D plus coverage for skilled nursing facility care coinsurance, Part A deductible, and foreign travel emergency.
- Plan N: All benefits of Plan D except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that do not result in an inpatient admission, plus foreign travel emergency coverage.
However, keep in mind that Medigap does not offer extended benefits, such as custodial care in a nursing home, or dental, vision, and hearing care.
People who enroll in a Medicare Supplement Plan pay a monthly premium for their coverage. Medigap premiums vary based on several factors, including age, gender, and plan type, but generally range from around $60 to $600 per month.
Medicare Part C, or Medicare Advantage
Part C offers an alternative way for people with Medicare to get their health benefits. Through this program, private insurance companies sell Medicare-approved health insurance plans known as Medicare Advantage Plans.
While Medicare Advantage Plans are technically still Medicare, they can have different costs or rules for accessing services than the traditional program. For example, they often require members to get non-emergency care from doctors in the plan’s network.
People with Medicare are eligible to join a Medicare Advantage Plan if they’re enrolled in both Parts A and B and live within a Medicare Advantage Plan’s service area.
What Medicare Advantage Covers
Medicare Advantage Plans are required to cover at least the same benefits as Original Medicare (Parts A and B). The majority of plans also include Part D drug coverage and other supplemental benefits, though this is not required.
In 2023, the vast majority of Medicare Advantage Plans cover vision, hearing, dental, telehealth, and fitness benefits. Other common supplemental benefits include over-the-counter items, transportation, and meal delivery.
Types of Medicare Advantage Plans
Insurers offer several types of Medicare Advantage Plans, including HMOs, PPOs, PFFSs, and SNPs. The type of plan a consumer chooses affects how they receive Medicare-covered health services.
Preferred Provider Organization (PPO) plans have a network of doctors and hospitals who’ve agreed to accept the plan. Members have coverage for out-of-network providers but generally pay less when they get care in-network. People who join PPO plans don’t need to choose a primary care doctor or get referrals to see a specialist.
Health Maintenance Organization (HMO) plans provide a network of healthcare providers and facilities. Coverage is generally limited to in-network providers unless it’s an emergency. Members are usually required to choose a primary care doctor who manages their care and provides referrals to other providers.
Private-Fee-for-Service (PFFS) plans sometimes offer provider networks, but members have the freedom to see any provider who accepts the plan’s terms. Unlike other plan types, members aren’t required to get approval from their plan before receiving covered services. Another key feature: PFFS plans are compatible with standalone Part D drug plans.
Special Needs Plans (SNPs)
Medicare SNPs tailor their covered benefits and provider networks to better suit people with complex health needs. Institutional SNPs (I-SNPs) are for people who live in nursing homes, rehabilitation hospitals, or similar settings. Chronic Condition SNPs (C-SNPs) are for people with certain health conditions, such as diabetes or dementia.
Dual Eligible Special Needs Plans (D-SNPs)
These Medicare SNPs are designed for those enrolled in both Medicare and Medicaid. D-SNPs coordinate members’ Medicare and Medicaid services to help ensure they receive the care they need.
Medicare Advantage Costs
Many Medicare Advantage Plans have $0 premiums, while others charge supplemental premiums. Members still pay their Part A and Part B premiums. Other costs include deductibles, copayments, and coinsurance, which vary depending on the plan and service, though plans are required to set annual limits on these costs. Limits vary from plan to plan, but in 2023, cannot be higher than $8,300 for in-network services.
Medicare Advantage Advantages and Drawbacks
Like any type of health insurance, Medicare Advantage Plans have advantages and disadvantages. Here are the key pros and cons of these types of plans.
- Provides Medicare benefits through a single, convenient plan
- Often includes benefits that aren’t covered by Original Medicare, such as routine dental, vision, and hearing care
- Sets limits on plan members’ annual out-of-pocket spending
- Accommodates varying preferences with several different plan types
- Limits members’ choices of doctors and other healthcare providers
- Doesn’t offer nationwide coverage for non-emergency care
- May have additional costs, such as supplemental monthly premiums
- Imposes additional rules on members, such as prior authorizations or referrals for specialist care
Medicare Part D, or Prescription Drug Coverage
Medicare Part D is an optional benefit that adds prescription drug coverage to Medicare. It’s available to all Medicare beneficiaries and is sold by Medicare-approved private insurance companies.
Insurers offer Part D through standalone plans designed to complement Original Medicare or through Medicare Advantage Plans that include Part D coverage. In both cases, these plans help beneficiaries pay for the prescription drugs they take at home.
What Part D Covers
Part D prescription drug plans cover a wide range of outpatient prescription drugs, such as those used to reduce pain, lower blood pressure, or treat infections. Coverage varies from plan to plan since insurers can create their own list of covered medications. This list is known as the formulary.
Plan formularies are generally required to cover at least two drugs in each commonly prescribed category. They must cover all medications in six protected classes: Antidepressants, antipsychotics, anticonvulsants, immunosuppressants, antiretrovirals, and antineoplastics.
Part D Costs
People who enroll in standalone Part D plans pay an average of $43 per month in premiums. Medicare Advantage Plans with drug coverage may or may not charge a premium. After meeting their plan’s drug deductible (if applicable), consumers pay a share of the cost of their covered prescriptions.
What Kind of Medicare Coverage Do You Need?
While the many parts of Medicare may seem complex, your coverage options are fairly straightforward. Medicare-eligible people can choose to either enroll in Original Medicare and supplement that choice with Part D and/or Medigap or enroll in Medicare Advantage.
To choose the right Medicare coverage for your situation, consider your current and upcoming health needs, your budget for health spending, and the healthcare providers you prefer to see.
Your Current and Upcoming Health Needs
Different types of Medicare plans offer different covered services and rules for accessing care. Consider the types of services you currently need and expect to need in the future when choosing a coverage option.
For people with existing health issues, Original Medicare is an appealing choice. The program doesn’t require referrals or prior approval before receiving services, so there are few barriers to accessing care. Healthy adults who don’t seek care often may prefer Medicare Advantage.
Your Overall Budget
Out-of-pocket healthcare costs vary across types of Medicare plans. Original Medicare offers standardized costs for covered services, with no out-of-pocket limit, unless beneficiaries buy a Medigap policy. Medicare Advantage costs vary from plan to plan, though each plan is required to set a limit on members’ out-of-pocket costs.
To choose the right option, look at your monthly and annual healthcare budget. Compare premiums across types of Medicare plans, and ask a trusted agent to help you compare cost-sharing requirements.
Your Preferred Healthcare Providers
The type of Medicare coverage you choose affects which doctors and other healthcare providers you can see. With Original Medicare, beneficiaries can seek care from any provider who accepts Medicare. Medicare Advantage Plans generally require members to get care from their provider network.
People who want to keep seeing their current doctors may be drawn to Original Medicare for its no-network coverage. If you prefer Medicare Advantage, determine if your providers are already in a plan’s network.
Medicare Advantage vs. Original Medicare: Which Should You Get?
This is an individual decision based on your own needs and preferences. Both Original Medicare and Medicare Advantage offer comprehensive health coverage, and neither is necessarily better than the other.
Current Medicare beneficiaries are evenly divided between the two options: About 54% of enrollees are in Original Medicare, while 46% are in a Medicare Advantage Plan. Studies show that people with both coverage types are similarly satisfied with their care.
Whichever option you choose, it’s not set in stone. Beneficiaries can switch between Original Medicare and Medicare Advantage, or vice versa, at set times throughout the year.
Consider Medicare Advantage If…
Medicare Advantage may be a better choice for your needs if you:
- Prefer receiving your Medicare benefits through a single plan
- Want coverage for routine dental care or other supplemental benefits
- Don’t mind being limited to a network of providers and facilities
- Rarely travel and don’t need coverage that works anywhere in the U.S.
- Want the security that comes with a defined out-of-pocket spending limit
- Have both Medicare and Medicaid and want help coordinating your benefits (D-SNPs)
- Have a complex health condition and want tailored benefits (C-SNPs)
Consider Original Medicare Instead If…
On the other hand, you may prefer the traditional program if you:
- Want the freedom to see any provider who accepts Medicare
- Travel frequently and want coverage that works anywhere in the U.S.
- Prefer not needing referrals for specialist care
- Want the predictability that comes with standardized benefits and costs
- Prefer not needing approval from a plan to receive covered services
- Are comfortable shopping for Part D and/or Medigap plans to build coverage
Putting It All Together
The different parts of Medicare work together to build comprehensive healthcare coverage. Some Medicare-eligible people choose to use Original Medicare (Part A and Part B), with or without a Part D and/or Medigap policy. Others choose to get their benefits through a Medicare Advantage Plan (Part C).
Consider your individual needs and preferences to build coverage that works for you. Think about your current and future healthcare needs, your overall budget for health spending, and your current doctors, specialists, and other healthcare providers. For help weighing your options, sit down with a trusted agent.