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Understanding Medicare’s Options: Parts A, B, C and D

Making sense of the alphabet soup of health care choices


spinner image illustration of a man pointing at medicare's parts on a white board
Centers for Medicare and Medicaid Services

The Medicare program is divided into four parts that cover everything from hospital care to doctor visits to prescription drugs.​ Here’s more information about each part.

Part A, hospital coverage, is free for most people

When you apply for Medicare, you’ll automatically be enrolled in Part A. It covers hospital stays, hospice care and some skilled nursing care that you may need after being hospitalized for a broken hip, a stroke or other episodes that require rehabilitation.

Most people don’t have to pay a premium for Part A. You’ve already paid into the system in the form of Medicare tax deductions from your paycheck. ​

However, Part A isn’t totally free. ​

Medicare charges a hefty deductible each time you’re admitted to a hospital during each benefit period. That deductible changes every year, but for 2024, it is $1,632. You can buy a supplemental or Medigap policy to cover it as well as some out-of-pocket costs for other parts of Medicare. 

Medicare pays for most hospital services for the first 60 days you’re in the hospital as an inpatient.

If you’re a U.S. citizen or have been a legal resident for at least five years but have not worked long enough to qualify for Medicare, you may able to buy into the program by paying a Part A premium. 

Part B, doctors and outpatient services, has a small deductible

This part of Medicare covers doctor visits, ambulance transportation, diagnostic screenings, lab tests, medical equipment and other outpatient services.

You’ll be subject to an annual deductible, $240 for 2024. And you’ll have to pay 20 percent of doctor visit bills and other outpatient services. A Medigap plan can help cover these expenses.

A monthly premium for Part B is $174.70 for most people in 2024, higher if your income is more than $103,000 as a single or $206,000 if married filing jointly. ​

If you’re collecting Social Security, the monthly premium will be deducted from your monthly benefit. ​

Because of the Part B premium, you may want to defer signing up if you’re still working and have insurance through your job or are covered in your spouse’s employer health plan.

The rules vary based on the size of the employer. Ask the human resources department about how the company’s policy works with Medicare.

If you aren’t covered by other insurance and don’t sign up for Part B when you first enroll in Medicare, you may have to pay a late enrollment penalty for as long as you’re in the program. ​

Part C, Medicare Advantage, rolls everything into one

Medicare Advantage is the private health insurance alternative to the federally run original Medicare. Think of Advantage as a kind of one-stop shopping choice that combines various parts of Medicare into one plan.

If you decide on a Medicare Advantage plan, you’ll still have to enroll in Parts A and B and pay the Part B premium — and Part A if required. Then, you’ll have to choose a Medicare Advantage plan and sign up with a private insurer. ​You may have to pay an additional premium to the plan.

The federal government requires these plans to cover everything that original Medicare covers. Most Medicare Advantage plans also fold in prescription drug coverage.

Some plans pay for services that original Medicare doesn't, including dental and vision care and sometimes over-the-counter medications and transportation to and from doctors' offices. However, you are likely to face more prior authorization requirements with Medicare Advantage than you are with original Medicare.

You can compare cost and coverage details of all of the plans available in your area using the Medicare Plan Finder.

Medicare Advantage plans have provider networks that affect your coverage and costs. With a Medicare Advantage health maintenance organization (HMO), you typically choose a primary care doctor who will direct your care and give you a referral to see a specialist. The plan may not cover out-of-network providers except for in emergencies.

Medicare Advantage preferred provider organizations (PPOs) have networks of doctors, hospitals and surgery centers that you often can use without needing a referral. If you go to a provider not in the plan’s network, you probably will pay more.

Video: What Are the Differences Among Medicare Parts A, B, C and D?

Part D, prescriptions, fills a gap in original Medicare

Medicare Part D plans, sold by private insurers, cover prescription drugs. Each plan can have different premiums and deductibles — up to $545 in 2024 — and offer different copayment tiers for prescription drugs. Generics have lower costs and brand-name medications are more expensive.

Starting in 2025, all Part D plans and Medicare Advantage plans with drug coverage must cap out-of-pocket costs for covered prescription drugs at $2,000 a year. If a drug is not on a plan’s formulary, its list of covered drugs, whatever you pay for it won’t be added to the $2,000 cap.

Use Medicare’s Plan Finder to compare plan premiums and payments for your prescriptions for all Part D plans in your area. The plans’ covered drugs and costs can change from year to year, so recheck your plan during open enrollment, Oct. 15 to Dec. 7 each year with coverage effective Jan. 1.

This story, originally published December 30, 2010, was updated with new information for 2024.

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