Medicare Parts A, B, C and D Explained: What Each Part Covers and Costs

Medicare can feel like alphabet soup, particularly when you are approaching 65, or have been on disability benefits and are trying to work out how health coverage fits alongside your income. There are four lettered parts, several enrolment windows, and a mix of premiums, deductibles and coinsurance, and each of these affects what you will actually pay.

This is where a clear, step-by-step explanation helps. In this guide, we’ll walk through what Medicare Part A, Part B, Part C and Part D each cover, what they cost, and how they fit together. We’ll also look at the common myths, the penalties worth avoiding, and the questions to ask before you choose.

Note: the figures below reflect 2025 Medicare amounts published by the Centers for Medicare & Medicaid Services (CMS). They are adjusted every year, so always confirm current numbers at Medicare.gov or in the annual “Medicare & You” handbook.

Medicare at a Glance: How the Four Parts Fit Together

Medicare is the federal health insurance programme for people aged 65 and over, and for some younger people with qualifying disabilities or specific conditions. It is not one single policy. It is a set of building blocks, and you choose how to combine them.

The simplest way to understand it is to split it into two routes:

• Original Medicare (Parts A and B): run directly by the federal government, with the freedom to see any provider that accepts Medicare.
• Medicare Advantage (Part C): a bundled alternative offered by private insurers, which replaces Original Medicare for day-to-day purposes and usually includes Part D.
• Part D: standalone prescription drug coverage that you can add to Original Medicare.

Medicare Parts A, B, C and D Compared at a Glance

Part	What It Is	Main Coverage	Typical Premium (2025)
Part A	Hospital insurance	Inpatient hospital stays, skilled nursing facility care, hospice, some home health	$0 for most people with 40 work credits
Part B	Medical insurance	Doctor visits, outpatient care, preventive services, medical equipment	$185 per month standard
Part C	Medicare Advantage	Everything in A and B, often plus dental, vision, hearing and drugs	Varies; many plans $0 extra, but you still pay Part B
Part D	Prescription drug plan	Outpatient prescription medicines	Varies by plan; annual out-of-pocket cap of $2,000

Medicare Part A Explained: Hospital Insurance Coverage and Costs

Part A is often called hospital insurance. It helps pay for care you receive when you are formally admitted as an inpatient, along with certain facility-based and end-of-life services.

What Medicare Part A Covers

• Inpatient hospital care, including a semi-private room, meals, nursing and medications given during your stay.
• Skilled nursing facility (SNF) care after a qualifying hospital stay of at least three consecutive days as an inpatient.
• Hospice care for those with a terminal illness and a life expectancy of six months or less.
• Limited home health care that is medically necessary and follows a hospital stay or other qualifying need.
• Inpatient mental health care in a psychiatric hospital, subject to a 190-day lifetime limit.

What Medicare Part A Costs

Most people do not pay a monthly Part A premium because they or their spouse paid Medicare taxes for at least 40 quarters (about ten years). If you have fewer work credits, the premium can be $285 or $518 per month in 2025, depending on how many quarters you have.

Even with premium-free Part A, there are cost-sharing amounts to be aware of:

Part A Cost Item	2025 Amount
Inpatient deductible (per benefit period)	$1,676
Hospital days 1–60	$0 after deductible
Hospital days 61–90	$419 per day
Lifetime reserve days (91 onward, 60 days total)	$838 per day
Skilled nursing facility days 1–20	$0
Skilled nursing facility days 21–100	$209.50 per day
Skilled nursing facility day 101 onward	You pay all costs

A Practical Example

Imagine you are admitted to hospital for a hip replacement and stay four nights. You would pay the $1,676 deductible and nothing further for those days. If you then need 30 days in a skilled nursing facility for rehabilitation, you would pay $0 for the first 20 days and $209.50 per day for the final 10 days, which comes to $2,095.

This is one of the main reasons many people look at supplemental cover, which we’ll explain shortly.

Medicare Part B Explained: Medical Insurance Coverage and Costs

Part B covers the outpatient and preventive care that most of us use far more often than a hospital stay. If Part A is for the big, infrequent events, Part B is for the regular ones.

What Medicare Part B Covers

• Doctor and specialist visits, including many services delivered by other health professionals.
• Outpatient care, such as day surgery, diagnostic tests, X-rays, and lab work.
• Preventive services, including flu shots, cancer screenings, and the one-time “Welcome to Medicare” visit.
• Durable medical equipment, such as walkers, wheelchairs, and oxygen equipment.
• Ambulance services when other transport would endanger your health.
• Some drugs administered in a clinical setting, such as certain chemotherapy treatments.
• Telehealth services within the rules currently in force.

What Medicare Part B Costs

Part B Cost Item	2025 Amount
Standard monthly premium	$185.00
Annual deductible	$257
Coinsurance for most services	20% of the Medicare-approved amount, with no annual cap

That last point is critical. Original Medicare has no out-of-pocket maximum. If you needed expensive outpatient treatment, a 20% share of a large bill could add up quickly.

Higher Earners and IRMAA

Higher-income beneficiaries pay an income-related monthly adjustment amount (IRMAA) on top of the standard premium. In 2025, this applies when your modified adjusted gross income from two years earlier is above $106,000 for individuals or $212,000 for joint filers. The Social Security Administration (SSA) sends a notice if you are affected, and you can appeal if your circumstances have changed significantly, for example after retirement.

How Part B Is Usually Paid

If you receive Social Security or railroad retirement benefits, the premium is normally deducted automatically from your monthly payment. Otherwise, you will be billed directly.

Medicare Part C (Medicare Advantage) Explained: Coverage, Costs and Trade-Offs

Part C is where many people feel the most uncertain, because it changes how you receive your benefits rather than simply adding to them. Medicare Advantage plans are sold by private insurers approved by Medicare, and they must cover everything Original Medicare covers (except hospice, which stays with Original Medicare).

What Medicare Advantage Plans Typically Include

• All Part A and Part B benefits.
• Prescription drug coverage in most plans (known as MA-PD plans).
• Extra benefits such as routine dental, vision, hearing aids, and fitness programmes, which vary by plan.
• A yearly out-of-pocket maximum on in-network care, capped at $9,350 in 2025 (many plans set it lower).

Common Medicare Advantage Plan Types

Plan Type	How It Works	Flexibility
HMO	Use a network; referrals are usually needed for specialists	Lower cost, less choice
PPO	Network preferred but out-of-network care is allowed at higher cost	More flexibility, often higher cost
PFFS	Plan sets payment rates; providers must agree to terms	Varies widely
SNP	Designed for specific groups, such as dual-eligible or chronic conditions	Specialised care coordination

What Medicare Advantage Costs

Many Medicare Advantage plans advertise $0 monthly premiums, but you must still pay your Part B premium. You may also face copayments for doctor visits, hospital stays, and specialists, depending on the plan.

The Trade-Offs to Weigh

Medicare Advantage can offer lower upfront costs and extra benefits. However, you may face network restrictions, prior authorisation requirements, and changing plan rules each year.

For a detailed look at how these plans compare with supplemental coverage, see our guide on Medigap vs. Medicare Advantage: how to secure low out-of-pocket costs.

Medicare Part D Explained: Prescription Drug Coverage and Costs

Part D helps pay for outpatient prescription medicines. It is offered by private insurers either as a standalone plan, to go with Original Medicare, or built into a Medicare Advantage plan.

What Part D Plans Cover

• Brand-name and generic drugs listed on the plan’s formulary (its list of covered medicines).
• Commonly used drug categories, with certain classes required to be covered.
• Vaccines recommended by the Advisory Committee on Immunization Practices.

How Part D Costs Work in 2025

Recent legislation has made a significant change to Part D. From 2025, there is an annual out-of-pocket cap of $2,000 for covered drugs, after which you pay nothing for the rest of the year.

Part D Cost Element	What to Know
Monthly premium	Varies by plan and location
Annual deductible	Up to $590 in 2025; some plans charge less or none
Copayments and coinsurance	Depend on the drug tier
Out-of-pocket cap	$2,000 per year
Late enrolment penalty	1% of the national base premium ($36.78 in 2025) for each month you were without creditable cover

Many beneficiaries also spread their costs through the Medicare Prescription Payment Plan, which allows you to pay in monthly instalments rather than at the pharmacy counter.

Extra Help for Lower Incomes

The Extra Help (Low-Income Subsidy) programme can reduce premiums, deductibles, and copayments for those who qualify based on income and resources. For a deeper walkthrough, our guide to the best insurance for seniors to cover prescription drug costs, including Part D and Extra Help programmes explains how to apply.

What About Medigap? Filling the Gaps in Original Medicare

Although it is not one of the four lettered parts, Medigap deserves a mention. Medicare Supplement Insurance is sold by private insurers and helps pay the deductibles, coinsurance and copayments that Original Medicare leaves behind.

• Plans are standardised by letter (for example, Plan G or Plan N), so benefits are the same regardless of the insurer.
• Premiums vary by insurer, age, location, and rating method.
• You cannot use Medigap with Medicare Advantage.
• The best time to buy is during your Medigap Open Enrolment Period, which lasts six months from the start of Part B at 65 or older, when you cannot be turned down or charged more for health conditions.

Medicare Myths vs Facts: Clearing Up Common Misunderstandings

Because Medicare is so often discussed in passing, a few misconceptions persist. Here is how they compare with reality.

Myth	Fact
“Medicare is free.”	Part A is premium-free for most, but Parts B and D carry premiums, and all parts include cost-sharing.
“Medicare covers everything.”	Original Medicare generally excludes routine dental, vision, hearing aids, and long-term custodial care.
“Medicare has an out-of-pocket limit.”	Original Medicare does not. Medicare Advantage plans do, and Part D now has a $2,000 cap.
“I can sign up whenever I like.”	Missing your window can lead to lifelong penalties and gaps in coverage.
“Medicare Advantage is the same as Medigap.”	They are entirely different. One replaces Original Medicare, the other supplements it.
“Disability benefits replace Medicare.”	Disability income and Medicare serve different purposes, and the two often work side by side.

Medicare Eligibility: Who Qualifies and When Does It Start?

Eligibility at 65

You are generally eligible for Medicare when you turn 65 if you are a US citizen or lawful permanent resident of at least five years. Your Initial Enrolment Period runs for seven months, beginning three months before the month you turn 65 and ending three months after.

For a month-by-month breakdown, see our guide to the Medicare Initial Enrollment Period: key dates, deadlines and how to avoid late penalties.

Eligibility Under 65 with a Disability

You can qualify for Medicare before 65 if you have received Social Security Disability Insurance (SSDI) benefits for 24 months. People with Amyotrophic Lateral Sclerosis (ALS) are eligible from the first month of SSDI entitlement, and those with end-stage renal disease may also qualify.

This is where disability and income replacement insurance intersects with health coverage:

• A private disability income policy replaces part of your earnings, but it does not provide health insurance.
• SSDI provides income, and Medicare eligibility follows after the 24-month waiting period.
• During the wait, you may rely on employer coverage, COBRA, Medicaid, or an ACA Marketplace plan.

If you are bridging that gap, it is worth understanding ACA Marketplace premium tax credits: how subsidies are calculated and who qualifies and how Medicaid vs Marketplace coverage: income limits, eligibility and how to switch between them compares for your situation.

Medicare Enrolment Windows and Penalties: What You Need to Know

Timing is among the most important parts of Medicare planning. Several enrolment periods apply, and each has its own rules.

Enrolment Period	When It Happens	What You Can Do
Initial Enrolment Period (IEP)	7 months around your 65th birthday	Sign up for Parts A, B, C and D
General Enrolment Period	January 1 to March 31 each year	Sign up for Part B if you missed the IEP (coverage starts the month after)
Annual Enrolment Period	October 15 to December 7	Change Medicare Advantage or Part D plans
Medicare Advantage Open Enrolment	January 1 to March 31	Switch plans or return to Original Medicare if already in Advantage
Special Enrolment Period	After qualifying events	Enrol or change plans outside regular windows

To understand how these windows differ, read our guide on Medicare annual enrollment vs open enrollment: what you can change and when. If a life event changes your situation, our overview of special enrollment periods for health insurance, including qualifying life events and documentation needed is a helpful companion.

Late Enrolment Penalties

Penalties can last for as long as you have Medicare, so they deserve attention:

• Part A: If you must buy it and delay, your premium may rise by 10%, for twice the number of years you went without it.
• Part B: Your premium rises by 10% for each full 12-month period you could have had Part B but did not.
• Part D: You pay 1% of the national base premium for each full month without creditable drug coverage.

For the calculation details and your options, see Medicare Part B and Part D late enrollment penalties: how they are calculated and whether you can appeal.

Still Working at 65? How Employer Coverage Interacts with Medicare

Not everyone needs to enrol in Medicare at 65. If you or your spouse are still working and have group health coverage through an employer, you may be able to delay Part B without a penalty. The rules depend on the size of the employer, so it is worth checking with your benefits administrator.

Key points to consider:

• Employers with 20 or more employees: the group plan is usually primary, and you can often delay Part B.
• Smaller employers: Medicare may be primary, so delaying could result in claims issues.
• Health Savings Accounts (HSAs): you cannot contribute once you are enrolled in Medicare.

For a thorough comparison, see turning 65 while still working: choosing between employer coverage and Medicare.

How to Choose Between Original Medicare and Medicare Advantage

There is no single “best” option. The right choice depends on your health, your budget, where you live, and how much flexibility you want.

Choosing Original Medicare with Medigap and Part D May Suit You If:

• You want the freedom to see any provider that accepts Medicare across the country.
• You travel frequently or live in more than one state.
• You prefer predictable costs and are comfortable paying a higher monthly premium.
• You have ongoing health needs and want to avoid network or prior-authorisation hurdles.

Choosing Medicare Advantage May Suit You If:

• You want lower monthly premiums and extra benefits like dental and vision.
• You are comfortable using a provider network.
• You value an annual out-of-pocket maximum for medical care.
• You are generally in good health and use fewer services.

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