Understanding Medicare
A clear, plain-language guide to Medicare Parts A, B, C, and D — what they cover, how they work, and what they cost.
Medicare Part A is Hospital Insurance. Most people don't pay a premium for Part A because they (or a spouse) paid Medicare taxes for at least 10 years (40 quarters) while working. Part A covers the cost of being admitted to a hospital, staying in a skilled nursing facility after a qualifying hospital stay, hospice care, and some home health services.
Part A uses a benefit period system. A benefit period begins the day you are admitted as an inpatient and ends when you have been out of the hospital (or skilled nursing facility) for 60 consecutive days. There is no limit to the number of benefit periods you can have, but you pay a new deductible for each one.
What Part A Covers
- Inpatient hospital care (semi-private room, meals, nursing)
- Skilled Nursing Facility (SNF) care after a 3-day hospital stay
- Hospice care for terminal illness
- Inpatient mental health care
- Some inpatient care in a religious non-medical health care institution
- Home health care (limited, if medically necessary)
What Part A Does NOT Cover
- Long-term custodial care (nursing home assistance with daily living)
- Private-duty nursing
- Private room (unless medically necessary)
- Personal care items (TV, phone)
- Blood (first 3 pints per benefit period)
2024 Part A Cost Summary
Medicare Part B is Medical Insurance. Unlike Part A, Part B requires a monthly premium for everyone. Part B covers two main categories: medically necessary services (services or supplies needed to diagnose or treat a medical condition) and preventive services (care to prevent illness or detect it at an early stage).
After you pay your annual deductible, Part B generally pays 80% of the Medicare-approved amount for covered services. You are responsible for the remaining 20% — this is called coinsurance. There is no out-of-pocket maximum with Original Medicare alone, which is one reason many people choose a Medigap Supplement plan.
What Part B Covers
- Doctor visits and specialist consultations
- Outpatient hospital services
- Lab tests, x-rays, MRIs
- Preventive screenings (mammograms, colonoscopies, etc.)
- Ambulance services
- Durable medical equipment (walkers, wheelchairs)
- Mental health outpatient services
- Physical, occupational, speech therapy
- Annual Wellness Visit (no cost sharing)
What Part B Does NOT Cover
- Most prescription drugs (Part D covers these)
- Routine dental care
- Routine vision and eyeglasses
- Hearing aids
- Routine foot care
- Cosmetic surgery
- Long-term care
- Chiropractic care (beyond spinal manipulation)
2024 Part B Cost Summary
* Higher-income individuals may pay more due to IRMAA surcharges. See the Costs & IRMAA page.
Medicare Part C — also called Medicare Advantage — is an alternative way to receive your Medicare benefits through a private insurance company approved by Medicare. Instead of getting Parts A and B from the federal government, you get your coverage through a private plan that has contracted with Medicare.
Most Medicare Advantage plans also include Part D (prescription drug) coverage, and many offer extra benefits not found in Original Medicare — such as dental, vision, hearing, and fitness programs. Plans operate through networks of providers (HMO or PPO structures), and your costs depend on the specific plan you choose.
Medicare Advantage Benefits
- All Medicare Part A and Part B coverage
- Often includes Part D drug coverage
- May have $0 monthly premium (beyond Part B)
- Built-in out-of-pocket maximum for protection
- May include dental, vision, hearing benefits
- May include fitness/gym memberships
- Transportation to medical appointments (some plans)
- Over-the-counter allowances (some plans)
Important Considerations
- Must use in-network providers (HMO) or pay more (PPO)
- Requires prior authorization for many services
- Plans change annually — review each year
- Network may exclude some specialists
- May not be accepted nationwide (some travel limitations)
How Medicare Advantage Works — Example
Scenario: Jane, 67, enrolls in an HMO Medicare Advantage plan with a $0 monthly premium, $6,700 annual out-of-pocket maximum, $15 PCP copays, and $50 specialist copays. She has a hip replacement costing $40,000. She pays her $1,500 inpatient hospital copay plus follow-up copays. Her total out-of-pocket exposure is capped at $6,700 — far less than 20% of $40,000 she would owe under Original Medicare alone.
Medicare Part D provides prescription drug coverage. It is offered through private insurance companies approved by Medicare, either as a standalone Prescription Drug Plan (PDP) that you add to Original Medicare, or bundled into a Medicare Advantage Prescription Drug plan (MAPD).
Each Part D plan has a formulary — a list of covered drugs organized into tiers that determine your cost. Tiers range from low-cost generics (Tier 1) to high-cost specialty drugs (Tier 5). Comparing formularies is critical if you take regular medications.
Starting in 2025, a $2,000 annual out-of-pocket cap on Part D costs takes effect — a major change that eliminates the previous coverage gap ("donut hole") situation.
How Part D Tiers Typically Work
| Tier | Drug Type | Typical Cost |
|---|---|---|
| Tier 1 | Preferred Generic | $0 – $5 copay |
| Tier 2 | Generic | $5 – $15 copay |
| Tier 3 | Preferred Brand | $40 – $50 copay |
| Tier 4 | Non-Preferred Brand | $90 – $100 copay |
| Tier 5 | Specialty Drugs | 25–33% coinsurance |
Costs vary by plan. Always compare plans based on YOUR specific medications at Medicare.gov Plan Finder.
Late Enrollment Penalty — Important!
If you don't enroll in Part D when first eligible and go 63+ days without creditable prescription drug coverage, you may owe a permanent late enrollment penalty (LEP). The penalty is 1% of the national base beneficiary premium for every month you delayed enrollment. This is added to your monthly premium for as long as you have Part D coverage.
Questions about which parts apply to your situation? David can walk you through everything.