Understanding all your health care options can be challenging, especially when it comes to Medicare. Why? Medicare isn’t just one plan—it’s broken down into different parts, each providing unique types of coverage.
Below, we explain the basics of Medicare Parts A, B, C, and D (as well as Medigap) and the important role they each play. Whether you’re age 65 yourself or helping someone else understand their health care choices, this guide can help you make sense of the various Medicare options.
Original Medicare (Parts A and B)
Together, Medicare Parts A and B are known as original Medicare. These parts cover a broad array of services older adults need to stay healthy:
- Part A (Hospital Insurance): This coverage pays for care received in the hospital. It also pays some of the costs of stays at skilled nursing facilities, or health care at home. Finally, Part A also covers hospice care for people who are terminally ill.
Medicare Part A is funded by the payroll tax (FICA) that is deposited into the Hospital Insurance Trust Fund. Most people don't pay a premium for Part A if they or their spouse paid Medicare taxes while working. - Part B (Medical Insurance): Medicare Part B pays for physician services, outpatient hospital care, and home health care that Part A does not pay for. It also covers services like diagnostic and laboratory tests, medical equipment (e.g., wheelchairs and hospital beds), mental health care, and preventive services. Most Medicare enrollees pay a monthly premium for Part B, which is $174.70 in 2024.
Medicare Advantage (Part C)
Medicare Part C, also known as Medicare Advantage, offers the same benefits as original Medicare. However, these plans are sold by private health insurance companies. Some Medicare Advantage plans include Part D prescription drug coverage. Many also offer benefits above and beyond what original Medicare provides—such as hearing aid coverage, fitness club membership, and other wellness benefits.
If you enroll in a Medicare Advantage plan, you still pay your monthly Part B premium. You may also pay an additional monthly premium on top of that and, for some services, a deductible and a portion of the cost of services received (coinsurance). Part C premiums vary by plan; the average basic monthly premium is estimated to be about $18.50/month in 2024.
Part D (prescription drug coverage)
Original Medicare (Parts A and B) covers a wide range of important health care services, but it does not cover prescription medications. Medicare Part D is a separate prescription drug plan available to Medicare enrollees. Like Medicare Advantage, the Part D benefit is sold through private insurers. These plans may be standalone or built into a Medicare Advantage plan.
Most people enrolled in a Part D plan (and not eligible for the Part D Low Income Subsidy) have out-of-pocket costs. These may include:
- Monthly premium (average Part D premium in 2024 is $55.50)
- Annual deductible (maximum $545 in 2024)
- Cost-sharing portion of plan-covered drugs
- Percentage of the cost of drugs during the period after the initial coverage period and before catastrophic coverage begins
Currently, if you reach the catastrophic coverage phase, you must pay minimal drug copayments or coinsurance. However, as of January 2024, the 5% coinsurance requirement for catastrophic coverage will be eliminated.
Medigap
Medigap, also known as supplemental insurance, is designed to be used alongside Parts A and B to cover out-of-pocket costs for Medicare-covered services. Medigap cannot be used with Medicare Advantage plans.
You’ll likely pay a monthly premium for Medigap in addition to your monthly Part B premium; premiums vary by plan.
Review your Medicare coverage each year
It’s important to understand that even when you choose a Medicare plan(s), you’re never locked in for more than 12 months. Every year, during the Medicare Open Enrollment Period (Oct. 15 – Dec. 7), you have the opportunity to re-evaluate, add, drop, or switch your Medicare health plan.
“It’s always a good idea to see if your current Medicare plan still works for you,” said NCOA's Gabriel Smith, Program Associate, Center for Economic Well-Being. “Like with any other kind of insurance, Medicare coverage and prices can change from one year to the next. Or maybe you need better coverage for certain conditions.”
Need help deciding which Medicare coverages are right for you? Learn about NCOA's partnership with trusted Medicare advisers—and how they can help you find a plan that fits your needs.
