What are the different parts of Medicare?

Medicare has four parts — A, B, C and D. The first two cover inpatient (hospitals, nursing homes and other similar facilities) and outpatient services. They make up Original Medicare. Part D helps with the costs of prescription drugs, and Part C, better known as Medicare Advantage, covers everything in Original Medicare while offering additional benefits like dental, hearing and vision coverage.

What parts of Medicare are mandatory?

None of Medicare's four parts are mandatory. However, you may incur penalties later if you don't apply when you first become eligible. Remember, initial eligibility only lasts for seven months — from three months before your 65th birthday month to three months after. Although not mandatory, you must also get Part A to keep your Social Security benefits. Fortunately, if you've worked for at least 40 quarters (usually 10 years), it won't cost you anything.

What parts of Medicare do I need?

It depends on your health care needs. Parts A, B and D cover different items and services. Knowing these can help you spot the gaps and determine whether getting Medicare Advantage (Part C) is worth the additional cost. Although Medicare Advantage provides additional benefits, it has its own premium and deductible. You must also continue paying your Part B deductible (and Part A, if you didn't qualify for premium-free Part A).

The Four Parts of Medicare Explained

Medicare Part A is hospital insurance. It covers hospital stays, skilled nursing facilities or home health care. Most people don’t have to pay a premium. However, each time you're confined, you must pay a deductible of $1,600.
Medicare Part B covers the costs of doctor's visits and other outpatient services. Your annual premium for 2023 is $164.90 (set by the federal government), though it may be higher depending on your income. You also pay a yearly deductible and 20% of the cost of some services.
Medicare Part C: Qualifying for Original Medicare (Part A and B) makes you eligible for Medicare Advantage (Part C). Part C combines the coverages of Original Medicare and may include other benefits, like dental and vision coverage. You can only purchase Medicare Advantage through a private health insurance provider.
Medicare Part D covers prescription drugs. Like Medicare Advantage, you must purchase Part D through a private insurance provider. Your costs will include premiums, deductibles, co-insurance and copays — these vary depending on the plan you get.

What Is Medicare?

Considering the average cost of health insurance, it's always best to know your options. Medicare is known as federal health insurance because it's government-funded. Medicare is available to individuals who are at least 65 years old. Younger people may qualify for it if they have specific disabilities or End-Stage Renal Disease.

Medicare gets funding from two trust funds — Hospital Insurance (HI) and Supplementary Medical Insurance (SMI). The former gets funding from several sources, including income taxes. So, the Medicare costs you encounter can be affected by how long you've worked and paid Medicare taxes.

Parts A and B are Original Medicare, and Part C is known as Medicare Advantage. You may also find supplemental plans such as Medigap to fill in the gaps in Original Medicare coverage.

MEDICARE ELIGIBILITY

Before you can get health insurance coverage through Medicare, you must ensure you are eligible, which is when one of the following applies:

You are at least 65 years old.
You have End-Stage Renal Disease (ESRD) or Lou Gehrig's disease.
You have received Railroad Retirement Board (RRB) benefits for at least four months.

If your primary qualifier is age, you can apply three months before your birthday. Your initial eligibility lasts until three months after you turn 65. After that, you may have a penalty.

Medicare Part A: Hospital Coverage

Medicare Part A, which covers inpatient care in hospitals, skilled nursing facilities, nursing homes and hospice care, is included in Original Medicare (along with Part B). You can use it in any hospital in the U.S. accepting Medicare. However, it does not cover the following:

Long-term care, room and board in nursing homes or assisted living facilities
Custodial care (bathing, dressing, eating, bathroom use and others)
Cost of hiring a private nurse
The first three pints of blood (except when the hospital gets it free from a blood bank)

Most policyholders don't pay for Medicare Part A — you don’t have to pay if you've worked for at least 40 quarters (ten years) and paid Medicare taxes. However, if you don't qualify for premium-free Part A, you may purchase it for $278 or $506 monthly, depending on your deficit.

Costs of Medicare Part A

Payment	Details
Part A Premium	Free if qualifying credits Otherwise, up to $506 per month
Part A Deductible	$1,600 for each inpatient hospital benefit period
Hospital Stays Copays	Days 1–60: $0 after you pay your Part A deductible Days 61–90: $400 copayment each day Days 91–150: $800 copayment each day within your 60 lifetime reserve days After day 150: You pay the entire bill
Skilled Nursing Facility Copays	Days 1-20: $0 copayment Days 21-100: $200 copayment each day Days 101 onward: You pay the entire bill
Hospice Care Costs	$0 for covered services
Home Health Care Costs	$0 for covered services 20% of the Medicare-approved amount for durable medical equipment

Medicare Part B: Physician Coverage

The difference between Medicare Parts A and B is the services they cover. While both are components of Original Medicare, the former focuses on inpatient services, and the latter helps with outpatient care costs, including:

Services from most health care providers
Ambulance services
Office visits and tests for some clinical research studies
Medical equipment
Inpatient and outpatient services and partial hospitalization for mental health patients
Cancer treatment

However, Part B won't cover dental and vision services, visits to your chiropractor or acupuncturist or most medical services outside of the U.S. It's also worth noting that Part B has no out-of-pocket maximum. That, plus your $20 copays, can quickly drive up your medical expenses.

Costs of Medicare Part B

Payment	Details
Premium	Begins at $164.90 each month and increases with higher income levels
Deductible	$226
Co-insurance	20% of Medicare-covered services after your deductible
Outpatient Services	20% of Medicare-covered services after your deductible
Inpatient Services	20% of Medicare-covered services after your deductible

BEWARE OF GAPS IN ORIGINAL MEDICARE COVERAGE

There are some health care needs that neither Medicare Parts A nor B cover. These gaps include:

Custodial or long-term care
Most dental care, including dentures
Routine physical exams
Eye exams
Hearing aids
Cosmetic surgery
Massage therapy
Prescription drugs

Depending on your medical needs, Medicare Advantage or a supplemental health plan may be worth considering.

Medicare Part C: Medicare Advantage

Although Original Medicare is government-funded, only private health insurance companies offer Medicare Advantage (Medicare Part C). If you qualify for Medicare Parts A and B, you're automatically eligible for Medicare Advantage.

The primary purpose of Medicare Advantage is not to supplement Original Medicare, but to replace it. That's why it covers everything in Parts A and B, along with dental, hearing and vision coverages, plus some prescriptions. It's an excellent option if you prefer to have one plan covering most of your medical needs.

However, purchasing Medicare Advantage doesn't exempt you from Part B costs, like premiums and deductibles.

Costs of Medicare Part C

Payment	Details
Part B Premium	Begins at $170.10 each month and increases with higher income levels
Part C Premium	Varies widely by plan The average cost is $18 per month in 2023
Deductible	Varies widely by plan
Co-insurance	Varies widely by plan

MONEYGEEK’S PICKS FOR MEDICARE ADVANTAGE PROVIDERS

Our analysis of the best Medicare Advantage plans led to the following recommendations:

Best Medicare Advantage PPO: Blue Cross Blue Shield
Best Medicare Advantage HMO: UnitedHealthcare
Best Medicare Advantage Without Drug Coverage: UnitedHealthcare
Best Medicare Advantage Plans With Low Costs: Aetna Medicare

While other health care providers also offer Medicare Advantage plans, these ranked highest in our study. They’re a good starting point.

Medicare Part D: Prescription Drug Plans

Like Medicare Part C (Medicare Advantage), you can purchase Part D from private insurers. It covers brand-name prescription drugs (or their generic counterparts), and costs may vary widely depending on the plan. Some insurers may require you to pay a deductible or a copay, while others don't.

When exploring Part D plans, ensure your required drug is within its formulary. Otherwise, your plan won't cover it. Another factor affecting your plan's pricing is where the medication falls within its four tiers.

Costs of Medicare Part D

Payment	Details
Part D Premium	Varies by plan The average in 2023 is $31.50
Deductible	Varies by plan The maximum for 2023 is $505
Co-insurance & Copays	Varies by plan and drug tier The lower the drug tier, the lower the copayment

BEWARE OF THE DONUT HOLE COVERAGE GAP

Purchasing Medicare Part D does not guarantee 100% coverage of all your prescription drug costs. Most have a coverage gap (known as the “donut hole”), which limits the amount your plan covers within a period.

For 2023, you must shoulder 25% of costs from prescription drugs after you've reached $4,660. Deductibles count toward your out-of-pocket expenses. Once your out-of-pocket expenses hit $7,400, you automatically get catastrophic coverage, which requires you to pay a minimal amount for co-insurance or copayment for the rest of the year.

Combining Medicare Coverage

There are several ways to put a Medicare plan together. One option is to purchase Original Medicare and add Part D to cover the costs of your prescription drugs. Alternatively, you can use Medigap or other supplemental plans as a substitute for Part D.

However, if you prefer an all-in-one plan, you might be better off enrolling in Medicare Advantage. This will save you from purchasing multiple health insurance policies, since most Part C plans include Part A and B coverage, plus some prescription drugs.

Understanding the various costs and coverage gaps will help you determine whether you have the coverage you need and prevent surprises when accessing health care.

Frequently Asked Questions About the Four Types of Medicare

MoneyGeek's guide explains the four parts of Medicare, but you may have other questions. These are the ones policyholders ask and their respective answers.

About Angelique Cruz

Angelique Cruz has been researching personal finance for three years, with expertise in macroeconomics, financial statistics and behavioral finance. After a decade-long stint as a management consultant creating professional and personal development programs, she now specializes in writing informative content around personal, auto and home loans. Angelique has a degree in psychology from the Ateneo de Manila University.

sources

Centers for Medicare & Medicaid Services. " CMS Releases 2023 Projected Medicare Basic Part D Average Premium." Accessed May 15, 2023.
KFF. "Medicare Part D: A First Look at Medicare Prescription Drug Plans in 2022." Accessed May 15, 2023.

Understanding the Four Parts of Medicare in 2023

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