Quick answer: Medicare has four main parts. Part A covers hospital care, Part B covers medical services, Part C (Medicare Advantage) is a private-plan alternative that bundles coverage, and Part D covers prescription drugs. Most people become eligible at 65, and missing enrollment windows can lead to lifelong late penalties.
Medicare is the federal health insurance program for people age 65 and older, and for some younger people with certain disabilities or conditions. Its letters and acronyms confuse nearly everyone at first. Part A, Part B, Part C, Part D, Medigap, IEP, SEP: a person could be forgiven for feeling that the program was designed to be read only by specialists.
The structure is easier than it looks once the pieces are separated. This guide explains each part using the language on Medicare.gov, the official government site, and the booklet “Medicare & You” published each year by the Centers for Medicare & Medicaid Services (CMS). Costs change annually, so the guide leaves out dollar figures for premiums and deductibles; check Medicare.gov for the current numbers. Everything here is general information only and does not take the place of personal guidance from a licensed professional or a State Health Insurance Assistance Program counselor.
Original Medicare: Part A and Part B
Parts A and B together are called Original Medicare. The federal government runs it, and you can generally see any doctor or hospital in the country that accepts Medicare.
Hospital coverage under Part A
According to Medicare.gov, Part A helps cover inpatient care in hospitals, skilled nursing facility care after a qualifying hospital stay, hospice care and some home health care. Many people pay no monthly premium for Part A because they or a spouse paid Medicare taxes while working for at least 10 years, or 40 quarters. People who do not meet that work requirement may be able to buy Part A.
Cost sharing still applies under Part A. A deductible applies for each benefit period, and longer hospital stays involve daily coinsurance. The word “benefit period” has a specific meaning in Medicare: it begins when you are admitted as an inpatient and ends after you have gone 60 days in a row without inpatient hospital or skilled nursing care. A new benefit period brings a new deductible.
Medical coverage under Part B
This part helps cover medically necessary services such as doctor visits, outpatient care, lab tests, preventive services, durable medical equipment and some home health care. It carries a monthly premium, an annual deductible, and then typically 20% coinsurance for most covered services, according to Medicare.gov. There is no yearly cap on that 20% under Original Medicare by itself, which is one reason many people add other coverage.
Higher-income beneficiaries can pay more for Part B, and the premiums beneficiaries can be higher. The Social Security Administration determines this income-related adjustment based on tax return information from a previous year.
What Original Medicare usually does not cover
Original Medicare leaves gaps. Medicare.gov notes that it generally does not cover most dental care, routine eye exams and eyeglasses, hearing aids, or long-term custodial care. Most prescription drugs taken at home are left out as well; those are covered by Part D, not by Parts A and B. Anyone who needs those items may look to another form of coverage, to a state program or to paying out of pocket.
Medicare Advantage, Also Called Part C
Medicare Advantage plans are offered by private insurance companies that contract with Medicare. Medicare.gov explains that these plans must cover everything Original Medicare covers, other than hospice care, which Original Medicare continues to handle. Many plans add extras, such as dental, vision or hearing benefits, and many include prescription drug coverage.
The trade-offs are practical rather than moral. Advantage plans often use provider networks such as HMOs or PPOs, so a doctor who is in one plan’s network may be out of another’s. Some plans require referrals to see specialists. Many require prior authorization for certain services. In return, Advantage plans set an annual out-of-pocket limit for Parts A and B services, which Original Medicare does not do. The limit changes every year. Related reading: prior authorization explained.
Costs differ by plan. Premiums may be low or zero for some plans, but you generally must keep paying your Part B premium. Plans can change their benefits, networks and prices each January, so reading the Annual Notice of Change that arrives each fall is worth the effort.
To compare what a plan pays versus what you owe, it helps to understand cost-sharing terms in general. The explainer on the health insurance card and the overview of premium factors offer a general vocabulary that applies, in part, to Medicare plans too.
Drug Coverage Under Part D
Drug plans are offered by private insurers and help cover the cost of prescription drugs. Medicare.gov says you can get Part D coverage through a stand-alone drug plan added to Original Medicare, or through a Medicare Advantage plan that includes drug coverage.
Every Part D plan has a formulary, which is its list of covered drugs. Plans sort the drugs into tiers, and a lower tier generally means a lower copay. Plans can also use rules such as prior authorization, quantity limits and step therapy. Checking that your regular medications are on the plan’s formulary, and at what tier, is one of the most useful steps in comparing plans.
Recent federal law has changed Part D cost sharing, including a yearly cap on out-of-pocket drug spending that began in 2025. Because the cap and related rules adjust over time, use Medicare.gov’s Plan Finder for current figures. Extra Help, a federal program, can lower drug plan costs for people with limited income and resources; the Social Security Administration handles applications.
Prescription coverage matters even for people who take few drugs today, because health needs change and the penalty rules reward early enrollment. Someone who is healthy at 65 and skips drug coverage may regret it later, since the penalty keeps growing for every month without coverage. Going without creditable drug coverage can lead to a late enrollment penalty, discussed below.
Medigap, the Supplement Option
Medicare Supplement Insurance, usually called Medigap, is sold by private companies and helps pay some of the costs that Original Medicare leaves behind, such as coinsurance, copayments and deductibles. Medicare.gov describes standardized Medigap plans labeled by letters, such as Plan G or Plan N. A given letter offers the same basic benefits no matter which company sells it, though prices differ.
Several points are worth knowing.
- Medigap works only with Original Medicare. Pairing it with a Medicare Advantage plan is not allowed.
- Medigap plans do not include drug coverage, so a separate Part D plan is needed.
- You pay a monthly premium for the Medigap policy in addition to your Part B premium.
- In most states, the best time to buy is during the Medigap Open Enrollment Period, a six-month window that begins when you are 65 or older and enrolled in Part B. During that window, insurers cannot deny coverage or charge more because of health conditions. After it, many states allow insurers to use medical underwriting.
Medigap is regulated by states, and a few states have different standardization rules. State insurance departments can answer questions about their own markets.
When to Enroll: The Calendar That Matters
Timing is where most Medicare mistakes occur. Medicare.gov describes several enrollment windows.
- Initial Enrollment Period (IEP). A seven-month window around your 65th birthday: it starts three months before the month you turn 65, includes your birthday month, and ends three months after.
- General Enrollment Period. If you missed your IEP and did not qualify for a special period, you can generally sign up for Part B from January 1 to March 31 each year, though coverage and penalties can be affected.
- Special Enrollment Period. People who delayed Part B because they or a spouse had coverage from current employment may qualify for a special period, which generally lasts eight months after that employment or coverage ends. Retiree coverage and COBRA do not generally count as current employment coverage for this purpose.
- Medicare Open Enrollment (the Annual Election Period). Each year from October 15 to December 7, anyone with Medicare can change Advantage plans, move between Advantage and Original Medicare, or join, switch or drop a Part D plan. Changes take effect January 1.
- Medicare Advantage Open Enrollment Period. From January 1 to March 31, people already in an Advantage plan can switch to another Advantage plan or return to Original Medicare, with limits.
People already receiving Social Security retirement benefits before 65 are usually enrolled in Parts A and B automatically. Everyone else generally has to sign up, and the Social Security Administration handles most applications.
Late Enrollment Penalties
Delays can be expensive and long lasting. Medicare.gov explains three kinds:
- Penalty on Part A: For people who must buy it, waiting beyond the initial window can raise the premium by 10%, for twice the number of years they could have signed up but did not.
- Penalty on Part B: The premium goes up 10% for each full 12-month period you could have had Part B but did not sign up, and the increase generally lasts as long as you have Part B.
- Penalty on Part D: The penalty equals 1% of the national base beneficiary premium for each full month without Part D or other creditable drug coverage, and it is added to your monthly premium for as long as you have Part D.
Credible coverage from an employer or union plan can prevent these penalties, which is why people still working at 65 should ask the plan administrator how their coverage works with Medicare. Medicare.gov and the benefits office are the right places to confirm.
Questions That Help When Choosing
A short list keeps comparisons focused. The questions below apply whichever route you lean toward.
- Do my doctors and hospital accept Medicare, and are they in the plan’s network if I choose Advantage?
- Are my prescriptions on the formulary, and what do they cost?
- What is the total expected yearly cost, including premiums, deductibles and the out-of-pocket limit?
- Do I travel often, or spend part of the year in another state?
- Does the plan offer benefits such as dental or vision that I would actually use?
Anyone helping a family member should also confirm that the person’s current coverage ends only after the new coverage is in place. For people who have a gap in health coverage in earlier years, the overview on seeing a doctor without insurance is a reminder that cost-saving options vary and may be limited.
Free counseling is available through State Health Insurance Assistance Programs (SHIPs), which are funded by the federal government and provide unbiased help. The Medicare toll-free line and Medicare.gov are other starting points. Be cautious about unsolicited calls or offers: Medicare does not call to sell you a plan.
This article is general information only. It is not insurance, legal, tax or medical advice, and Medicare rules and costs change each year. Confirm details at Medicare.gov, with a SHIP counselor, or with a licensed professional before choosing coverage.
Frequently Asked Questions
When am I first eligible for Medicare?
Most people become eligible at age 65. Some younger people qualify because of a disability or conditions such as end-stage renal disease or ALS. The seven-month Initial Enrollment Period surrounds the 65th birthday.
Is Medicare free?
Not entirely. Many people pay no premium for Part A, but Part B and Part D usually carry monthly premiums, and cost sharing such as deductibles and coinsurance applies. Amounts change every year.
Can I have Medigap and Medicare Advantage together?
No. Medigap works with Original Medicare only, and it is generally illegal to sell a Medigap policy to someone in an Advantage plan.
What is the difference between Medicare and Medicaid?
Medicare is a federal program tied mainly to age or disability. Medicaid is a joint federal and state program based on income and other factors, and its rules vary by state. Some people qualify for both.
How often can I change my plan?
Most changes happen during the fall Open Enrollment window from October 15 to December 7, with some further options at other times for people who qualify.
