Medicare Parts A, B, C, and D

Medicare Part A, often called hospital insurance, covers inpatient hospital stays, skilled nursing facility care (following a qualifying hospital stay), hospice care, and some home health services. Most people do not pay a premium for Part A if they or their spouse paid Medicare taxes for at least 40 quarters (10 years) of work. Part A does have deductibles and coinsurance for hospital stays beyond certain periods.

Medicare Part B covers medically necessary outpatient services, including doctor visits, lab tests, preventive screenings, durable medical equipment, mental health services, and some home health care. Part B requires a monthly premium, which is $185.00 for most beneficiaries in 2025 (subject to IRMAA surcharges for higher-income individuals). Part B also has an annual deductible and typically covers 80% of approved services, leaving the beneficiary responsible for the remaining 20%.

Medicare Part C, known as Medicare Advantage, is offered by private insurance companies approved by Medicare. These plans must cover everything Parts A and B cover, and many also include Part D drug coverage, vision, dental, hearing, and other benefits. Medicare Advantage plans may have different cost structures, including copays, network restrictions, and annual out-of-pocket maximums. Enrollment in a Medicare Advantage plan means you receive your Medicare benefits through that plan rather than through Original Medicare.

Medicare Part D provides prescription drug coverage through private insurance plans. Part D plans vary in their formularies (covered drug lists), costs, and pharmacy networks. Part D also has an IRMAA surcharge for higher-income beneficiaries. The Inflation Reduction Act introduced significant changes to Part D, including a $2,000 annual out-of-pocket cap for Part D costs beginning in 2025, and a provision allowing Medicare to negotiate prices on certain high-cost drugs.

Choosing between Original Medicare (Parts A and B) with a standalone Part D plan and supplemental coverage versus a Medicare Advantage (Part C) plan is one of the most important healthcare decisions in retirement. Each approach has different tradeoffs involving costs, provider access, flexibility, and coverage comprehensiveness.