An Introductory Guide to Medicare Parts A, B, C, and D

Medicare coverage and benefits are divided into four main parts

Nurse talking to senior woman in hospital bed

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Most people know Medicare as the federal health insurance program that serves U.S. citizens who are ages 65 or higher. What many people don't realize is that it also covers other smaller groups, such as people below that age with disabilities.

Founded in 1965, Medicare has grown to become a key provider of health insurance to older Americans. Although there are many sources that express concern over whether the program will be solvent in the long term, many expect the Hospital Insurance (HI) Trust Fund that covers Medicare Part A to pay full benefits until 2026. It is also thought that the Supplementary Medical Insurance (SMI) Trust Fund that covers Parts B and D will be financed for many years to come.

Still, simply planning to enroll in Medicare when you reach the age of 65 may not be enough to get a handle on your health care. There is much to know about Medicare, such as what it covers and does not cover. Learning about Parts A, B, C, and D is the first step to planning for the full scope of health care after you retire.

Overview of Medicare Parts

Of all the factors that go into your retirement planning, the cost of health care may be one of the hardest to predict and also the most costly. To make matters worse, the programs within Medicare are quite complex, and most retirees do not fully understand what their benefits are.

The best place to start as you prepare to study this health care program for seniors is to learn about the four main parts of Medicare, what each consists of, and how they work. These are:

  1. Medicare Part A: Hospital insurance
  2. Medicare Part B: Medical insurance
  3. Medicare Part C: Medicare Advantage
  4. Medicare Part D: Prescription Drug Coverage

Medicare Part A

Medicare Part A is known as hospital insurance. It covers hospital expenses, such as inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. Part A also covers services like lab tests and surgeries.

Medicare Part A is perhaps the most well-known part of the Medicare program. Retirees (and their spouses) aged 65 and over who meet certain standards, such as paying at least 10 years into the Medicare system through Medicare taxes, pay no premiums for Part A. You'll have to pay for your own monthly premiums if you don't qualify for Part A. This can be a major expense, cited as up to $471 per month as of 2021.

For the most part, both Parts A and B are available to people who are 65 or older, have a disability, or have End-Stage Renal Disease (ESRD). If you plan to receive Social Security or Railroad Retirement Board benefits at least four months before you reach age 65, you will automatically be enrolled in Parts A and B. If you do not receive these benefits by that time, you'll have to sign up for Parts A and B with Social Security.

You can choose to delay Part B if you choose, but be aware that Part A is like a baseline. It sets the bare minimum for what your health plan will need to cover, and should be in place at the very least for emergencies. While having Part A alone is better than having nothing at all, most people opt for the extra coverage that comes in the form of Part B.

Each of the four Medicare parts have deductibles of varying amounts that you must pay before the plan starts to pay for services. This is on top of the cost of monthly premiums.

Medicare Part B

Medicare Part B is the most common, and known simply as medical insurance. It extends the hospital and medical supply plan that Part A provides. Part B also covers medically necessary services that you need to have a condition treated, as well as preventative care, which is used to prevent illness.

Part B covers costs for doctor visits and outpatient services, such as physical therapy. It can also cover costs like ambulance services, mental health services, some prescription drugs, and durable medical equipment, such as wheelchairs and walkers.

The most important piece of Part B is that it covers what is considered preventive care, not just the medical necessities of Part A.

Most people who are eligible for free premiums under Part A can enroll in Part B as well. But unlike Part A, to receive Part B coverage, you must pay a monthly premium. The standard Part B monthly premium amount is $148.50 as of 2021, but the amount varies based on your income. The more you earn, the higher your Part B premium will be.

Note that having Parts A and B is not airtight. Even if you are covered by both Part A and Part B, you may still have gaps in coverage of health care services you might rely on. For example, long-term care, most dental care, annual eye exams, and hearing aids are not covered.

Medicare Part C

Medicare Part C is also known as Medicare Advantage. Unlike Parts A and B, Part C is offered through private companies that contract with Medicare to provide Part A and Part B benefits. In other words, your health care under this section won't be paid for by the standard Medicare program.

The main reason people like Medicare Advantage Plans is that it allows you to choose the way you engage for services. Part C works through a sub-plan, such as an HMO, PPO, or Medical Savings Account Plan. It also covers a larger scope of prescription drugs.

To join one of these plans, you must you live in an area where a plan is offered and you must have Medicare Parts A and B. Starting January 2021, a person with end-stage renal disease can join a Medicare Advantage Plan. Since Part C plans are offered by private companies, you'll need to find a plan through Medicare's Plan Finder and then sign up for Medicare Advantage through the company website.

Part C premium costs vary based on the plan provider. The average Medicare Advantage Plan with prescription drug coverage costs around $21 per month in 2021, dropping slightly to about $19 in 2022.

People who have Part C do not need Medigap insurance. This is a type of add-on plan you might choose to purchase if you have Medicare Parts A and B but want to cover some of the holes they leave.

Medicare Part D

One of the biggest gaps in the Medicare Parts is prescription drug coverage. To fill that gap, Part D was created in 2003 to cover prescription drugs for those who choose to purchase it. Like Part C, Part D is offered through private companies that contract with Medicare.

If you have Medicare in any form, you can enroll in Part D by finding a plan through Medicare's Plan Finder. You'll need to fill out an application with the plan provider. If you already have a Medicare Advantage Plan, proceed with caution. If you opt to enroll in the Part D plan, you will be cut from the Advantage Plan and returned to the basic Medicare program, since you won't need both.

You pay for Part D through monthly premiums, and as with Part C, these prices will vary by provider. The average monthly premium for Part D coverage was $31,47 in 2021, and this increases to $33 in 2022.

The Bottom Line

Finding proper health care insurance for seniors can be confusing. Medicare brings some structure to the health care maze through its parts: A, B, C, and D.

While Part A covers hospital services, Part B covers medically-necessary care and preventative care. As an alternative to these two parts, you might instead choose to purchase Part C coverage, known as Medicare Advantage, through a private company. You can also supplement the prescription drug coverage in either Parts A and B or Part C through optional Part D drug coverage.

Each Medicare part covers unique services and comes at different premium costs. There are also different ways to sign-up. If you want to find a simple method to break it all down, the Medicare website is a good place to visit before you enroll.