Medicare has four parts, each covering a different category of healthcare. Understanding what each part covers — and how they fit together — is the starting point for making good Medicare decisions. This page explains all four parts in plain language.
Part A — Hospital Insurance
Part A covers inpatient hospital care, skilled nursing facility care after a qualifying hospital stay, hospice care, and limited home health services. Most people pay no premium for Part A because they or their spouse worked and paid Medicare taxes for at least 10 years (40 quarters). People who did not meet the work requirement can buy Part A, but the premium is significant.
Part A has a per-benefit-period deductible — not a single annual deductible. In 2025, the deductible is $1,676 per benefit period. A benefit period begins when you are admitted as an inpatient and ends after 60 consecutive days without inpatient care. If you are readmitted after that window, a new deductible applies.
Part B — Medical Insurance
Part B covers outpatient medical services — doctor visits, lab work, preventive screenings, durable medical equipment, mental health services, and most medically necessary procedures outside a hospital. Most people pay a monthly premium for Part B regardless of how long they worked.
In 2025, the standard Part B premium is $185.00 per month. Higher-income beneficiaries pay more through IRMAA surcharges. After a $257 annual deductible, Medicare pays 80 percent of covered services and you pay the remaining 20 percent — with no out-of-pocket maximum unless you have supplemental coverage.
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Part C — Medicare Advantage
Part C — Medicare Advantage — is an alternative way to receive your Medicare benefits. Instead of using Original Medicare directly, you enroll in a private insurance plan approved by Medicare. These plans must cover everything Parts A and B cover, and most also include Part D prescription drug coverage.
How Medicare Advantage Works
You still pay your Part B premium, but you also pay the plan’s premium (which may be $0 or higher). Medicare pays the plan a set amount per month to cover your benefits. The plan then manages your care, often through a network of providers. Out-of-pocket costs vary by plan but are capped each year — Original Medicare has no cap.
Network and Referral Rules
Most Medicare Advantage plans use HMO or PPO structures with network restrictions. HMO plans typically require you to use in-network providers and get referrals for specialists. PPO plans allow out-of-network care at a higher cost. This is a meaningful tradeoff compared to Original Medicare, which lets you see any Medicare-accepting provider nationwide.
Extra Benefits
Many Medicare Advantage plans offer coverage that Original Medicare does not include — such as routine dental, vision, hearing, and gym memberships. The value of these extras varies widely by plan and location. Comparing available plans in your area is essential because plan options, costs, and included benefits change each year.
Part D — Prescription Drug Coverage
Part D covers prescription drugs. It is sold through private insurance companies approved by Medicare. If you have Original Medicare, you add a standalone Part D plan. If you have Medicare Advantage, drug coverage is usually bundled in.
Premiums and Deductibles
Each Part D plan charges its own monthly premium, and most plans have an annual deductible before coverage kicks in. Premiums and cost-sharing vary significantly between plans — choosing the wrong plan for your specific medications can cost hundreds of dollars more per year than a plan optimized for your needs.
The $2,000 Out-of-Pocket Cap
Starting in 2025, the Inflation Reduction Act capped Medicare Part D out-of-pocket drug costs at $2,000 per year. This is a major change for people with expensive medications who previously faced unlimited cost-sharing. Once you reach $2,000 in out-of-pocket costs, your plan covers 100 percent of covered drugs for the rest of the year.
Choosing a Plan and the Formulary
Each plan has a formulary — a list of covered drugs organized into tiers. Your drugs’ tier determines your copay. Before enrolling in any Part D plan, compare your specific medications against the plan’s formulary. Medicare’s online plan finder at medicare.gov makes this comparison straightforward. Review your plan every year at open enrollment — formularies change.
How the Parts Work Together
Most people on Original Medicare have Parts A and B together. They then either add a standalone Part D plan and optionally a Medigap (supplemental) policy, or they switch to a Medicare Advantage plan (Part C) that bundles all coverage.
Part C is an all-in-one alternative — not an add-on to Original Medicare. You cannot have both Original Medicare and Medicare Advantage simultaneously. The path you choose at enrollment has lasting consequences, particularly with Medigap, where guaranteed enrollment windows are limited.
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Disclosure: We may receive a referral from Chapter if you choose to use their service. Chapter is a licensed health insurance agency and is not affiliated with or endorsed by Medicare or any government agency.
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