Medicare: Understanding Parts A, B, C, and D

Whether your 65th birthday is on the horizon or decades away, understanding the different parts of Medicare is critical.  Depending on your age or health status, you may soon be qualified for Medicare. While you’ve likely heard of it before, we’re breaking down what exactly Medicare is, who Medicare benefits, and what each Medicare part covers.

What Is Medicare?

Medicare is a government-funded national health insurance program established in 1966. It is designed to offer coverage to individuals including:¹

• Those who are 65 or older
• Individuals under 65 with qualifying disabilities
• Individuals with End-Stage Renal Disease (ESRD)

Medicare is broken down into several parts that cover specific services. While Part A and Part B are part of the “original” Medicare plan, Parts C and Part D offer optional additional coverage.

Part A: Hospital Insurance

Part A covers inpatient hospital care, skilled nursing facility costs, hospice services, lab tests, surgeries, and some home health care services. While very few beneficiaries must pay Part A premiums out of pocket, the annually adjusted standard deductibles still apply.^1,2

As such, it covers hospital-related expenses such as:²

• Inpatient hospital care
• Skilled nursing facility costs
• Hospice
• Lab tests
• Surgery
• Some home health care services

Most beneficiaries don’t pay Part A premiums out of pocket if they or their spouse paid Medicare taxes while working.¹ It’s important to note, however, that annually adjusted standard deductibles still apply.

Many pre-retirees are frequently warned that Medicare will only cover a maximum of 100 days of nursing home care, provided certain conditions are met. Part A is the plan with these provisions. Under the current Part A rules, a beneficiary would pay $0 for days 1–20 of care in a skilled nursing facility (SNF). During days 21–100, a $204 daily coinsurance payment may be required.^4,5

Recognizing the limitations of Part A, some individuals seek alternatives to manage the costs of extended care. Part B covers physicians’ fees, outpatient hospital care, certain home health services, durable medical equipment, and other services that are not covered by Part A.^4,5

Part B: Medical Insurance

Part B is considered the medical insurance portion of Medicare.

It covers expenses like:²

• Physicians’ fees
• Outpatient hospital care
• Certain home health services
• Durable medical equipment
• Some offerings not covered by Medicare Part A

Part B does come with some costs, however, which are adjusted annually. The premiums vary, according to the Medicare recipient’s income level, but the standard monthly premium amount is $174.70 for 2024, and the current yearly deductible is $240.⁵

Part C: Medicare Advantage

Sometimes called “Medicare Part C,” Medicare Advantage (MA) plans are often viewed as an all-in-one alternative to Original Medicare.

MA plans are offered by private companies approved by the federal government. Although these plans come with standardized minimum coverage, the amount of additional protection can drastically differ from one person to the next. This is due to unique provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits.

In other words, comparing prices and services offered by different vendors may be the best way to find a Medicare Advantage plan that works for you.⁶  If you’re interested in obtaining an MA plan, you may find it beneficial to compare prices and services offered by different vendors.

Part D: Prescription Drug Coverage

While MA plans often offer prescription drug coverage, insurers also sell federally standardized Medicare Part D plans as a standalone product to those with Medicare Part A and/or Part B.

Every Part D plan has its own formulary, or list, of covered medications. Visit Medicare.gov to explore the formulary and prices of approved drugs for your Part D plan, organized by tier.⁷

If you’re approaching 65 or think you may be otherwise eligible for Medicare, review each part carefully to determine what may work best for you. Medicare.gov is a great place to start all your research. There, you’ll find answers to your most common questions and more information on the different Medicare plans offered in your area.

If you have any questions, your trusted financial professional may be able to help you review your coverage options in detail.