Medicare Parts A, B, C, and D Explained

The four parts

Medicare is divided into four parts. Part A covers hospital services, Part B covers physician and outpatient services, Part C is the private alternative that bundles A and B (and usually D), and Part D covers prescription drugs. Knowing which part covers which kind of care is the foundation for every later decision.

Part A: hospital insurance

Part A covers inpatient hospital stays, skilled nursing facility care after a qualifying hospital stay, hospice care, and some home health care. Most people have already paid for Part A through payroll taxes during their working years and pay no monthly premium for it. There is, however, a per-benefit-period deductible when you are admitted, plus daily coinsurance for long stays.

Part B: medical insurance

Part B covers physician visits, outpatient hospital care, durable medical equipment, preventive services, and many other outpatient services. Unlike Part A, Part B carries a monthly premium for everyone enrolled. Higher-income beneficiaries pay an additional income-related surcharge known as IRMAA. Part B also has an annual deductible, after which Medicare typically covers 80 percent of the approved amount and the beneficiary owes 20 percent. There is no out-of-pocket maximum on that 20 percent in Original Medicare; this is one of the principal reasons people purchase Medigap.

Part C: Medicare Advantage

Part C, also called Medicare Advantage, is private coverage that replaces Original Medicare. The federal program pays the carrier a fixed monthly amount per enrollee, and the carrier takes on the risk of providing all of the enrollee's Medicare-covered care. Part C plans typically have low or zero monthly premiums and often include extra benefits like dental and vision, but use provider networks and prior authorization. Most Part C plans also include Part D drug coverage.

Part D: prescription drug coverage

Part D covers outpatient prescription drugs. It is delivered either as a standalone Prescription Drug Plan paired with Original Medicare, or as part of a Medicare Advantage plan. Plans set their own formularies and tiers within federal rules. Part D has its own monthly premium, its own late enrollment penalty for people who delay without creditable coverage, and its own income-related surcharge.

How the parts combine in practice

Most beneficiaries land in one of two configurations. The first is Original Medicare (Parts A and B) plus a standalone Medigap policy plus a standalone Part D plan. The second is a Medicare Advantage plan that combines Parts A, B, and usually D into a single private policy. The choice between these two configurations is the single biggest decision in Medicare and is not symmetric across time, since switching back from Medicare Advantage to Original Medicare plus Medigap can be hard or impossible after the federal Medigap Open Enrollment Period closes.

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