The four parts of Medicare and what each one pays for

Medicare has four separate parts, and each one covers different things. Part A covers hospital stays, skilled nursing care, and hospice. Part B covers doctor visits, outpatient care, and medical equipment. Part D covers prescription drugs. Medigap (also called supplemental insurance) covers costs that Parts A and B leave you paying out of pocket — like copays and coinsurance.

Most people turning 65 get Part A and Part B automatically. Part D and Medigap are optional but strongly recommended, because without them you will pay the full cost of prescriptions and a larger share of medical bills. The parts work together: Part A and B are your foundation, Part D fills the drug gap, and Medigap reduces what you owe on top.

You do not have to take all four. Some people choose Part A and B only. Others add Part D but not Medigap. The combination you pick affects how much you pay each month and how much you pay when you actually use care.

Key Takeaways

  • Part A covers hospital, skilled nursing, and hospice care; Part B covers doctors and outpatient services; Part D covers prescription drugs; Medigap covers the copays and coinsurance that A and B do not.
  • Part A and B are usually automatic at 65, but Part D and Medigap are optional choices you make during your enrollment window.
  • If you delay Part D enrollment without other drug coverage, you will pay a penalty on top of your premium for as long as you have Medicare.
  • Medigap plans are sold by private insurance companies and have different letter names (Plan A, Plan B, Plan G) that determine what they cover.
  • You can switch Medigap plans once a year, but switching Part A or B is not possible — you are locked in once you enroll.

Medicare Part A: Hospital and skilled nursing care

Part A covers inpatient hospital stays, skilled nursing facility care after a hospital stay, home health services, and hospice. You pay nothing for Part A premiums if you or your spouse paid Medicare taxes for at least 10 years while working. If you did not, you can still buy Part A, but the monthly premium will be higher.

When you use Part A, you pay a deductible — a flat amount you owe before Part A starts paying. For hospital stays in 2024, that deductible is $1,632 per benefit period. A benefit period starts when you enter the hospital and ends 60 days after you leave without needing hospital care again. If you go back to the hospital within 60 days, you are still in the same benefit period and do not pay another deductible.

After you pay the deductible, Part A covers the full cost of the first 60 days of a hospital stay. Days 61 through 90 require a copay per day. Beyond 90 days, you pay the full cost unless you use your "lifetime reserve days" — a limited pool of extra days that Part A will cover at a higher copay. Once you use those reserve days, they do not come back.

Medicare Part B: Doctor visits and outpatient care

Part B covers doctor visits, preventive care, lab tests, X-rays, physical therapy, and durable medical equipment like wheelchairs and oxygen. It also covers emergency room visits and ambulance services. Part B has a monthly premium that most people pay automatically from their Social Security check.

You also pay Part B's annual deductible — $240 in 2024 — before Part B starts paying its share. After you meet the deductible, Part B typically covers 80 percent of the cost of a covered service, and you pay 20 percent as coinsurance. For some preventive services like annual wellness visits and cancer screenings, Part B covers 100 percent and you pay nothing.

Part B has no limit on how much you can use it in a year. You can see as many doctors as you want, get as many tests as your doctor orders, and Part B will keep paying its 80 percent share. However, the 20 percent coinsurance you owe can add up quickly if you have a serious illness or need expensive care.

Medicare Part D: Prescription drug coverage

Part D covers prescription medications. It is sold by private insurance companies, not by Medicare directly, so you choose which Part D plan to join. Plans differ in which drugs they cover, how much you pay, and which pharmacies you can use. You can change Part D plans once a year during the annual enrollment period in October and November.

Part D has a monthly premium, a yearly deductible (which varies by plan), and then a three-step cost structure. In the first step, you pay a copay or coinsurance for each prescription. Once you and your plan have spent a certain amount on drugs in a year, you enter the "donut hole" — a gap where you pay a larger share of the cost. After you spend enough out of pocket, catastrophic coverage kicks in and your costs drop again.

If you do not join a Part D plan when you first become may be able to access at 65, and you do not have other drug coverage, you will pay a late enrollment penalty for as long as you have Medicare. The penalty is roughly 1 percent of the national average Part D premium for each month you were not enrolled. This penalty is permanent and gets added to your Part D premium every month.

Medigap: Supplemental insurance that covers Part A and B gaps

Medigap is private insurance that pays for costs that Medicare Part A and B do not cover — copays, coinsurance, and deductibles. It is not the same as Medicare Advantage, which is a different way to get Medicare coverage. Medigap works alongside Original Medicare (Part A and B) to reduce how much you pay out of pocket.

Medigap plans are named with letters: Plan A, Plan B, Plan C, Plan D, Plan G, Plan K, Plan L, Plan M, and Plan N. Each letter covers a different set of costs. For example, Plan G covers your Part B coinsurance (the 20 percent you normally owe), your Part A deductible, and some other costs. Plan A covers fewer things and costs less per month. Plan N covers more things but requires you to pay copays at the doctor's office.

Medigap premiums vary widely depending on which plan you choose and which insurance company sells it. The same Plan G from one company might cost $150 a month while another company charges $200 for the identical coverage. You can switch Medigap plans once a year, so if your premium goes up, you can shop for a better rate.

How the parts work together and what you actually pay

Here is an example of how the parts coordinate. You go to the hospital for three days. Part A covers the full cost after you pay the $1,632 deductible. Later that month, you see your doctor. Part B covers 80 percent of the visit cost after you meet the $240 deductible, so you owe 20 percent coinsurance. If you have Medigap, your Medigap plan pays that 20 percent coinsurance, so you owe nothing. If you do not have Medigap, you pay the 20 percent out of your own pocket.

Then you fill a prescription for a blood pressure medication. Part D covers it according to your plan's formulary (the list of drugs it covers). You pay a copay — maybe $10 or $50 depending on the drug and your plan. Part A, Part B, and Medigap do not help with this cost; only Part D does.

The combination you choose determines your total monthly cost and your total cost when you use care. Part A and B alone leave you exposed to deductibles and coinsurance. Adding Medigap reduces that exposure but costs more per month. Adding Part D protects you from the full cost of drugs but also costs more per month. Most people find that the monthly cost of Part D and Medigap is worth it because it prevents a single serious illness from costing thousands of dollars.

Enrollment windows and when you can make changes

You become may be able to access for Medicare at 65. If you are still working and have health insurance through your job, you can delay Part B without penalty, but you should enroll in Part A even if you do not use it yet. If you delay Part B and do not enroll within eight months of leaving your job, you will pay a penalty for life.

Part D and Medigap have different enrollment rules. For Part D, your initial enrollment window is seven months centered on your 65th birthday — three months before, the month you turn 65, and three months after. If you miss this window and do not have other drug coverage, you pay the late enrollment penalty. You can change Part D plans every year during the annual enrollment period (October 15 to December 7).

For Medigap, you have a six-month open enrollment period starting the month you turn 65 and are enrolled in Part B. During this window, insurance companies cannot deny you or charge you more based on your health. If you miss this window, you can still buy Medigap, but companies can charge you more or deny you coverage if you have health problems. You can switch Medigap plans anytime, but you lose the protection of the open enrollment period once it ends.

Frequently Asked Questions

Do I have to take all four parts of Medicare?

No. Part A and B are usually automatic, but you can refuse them. Part D and Medigap are optional. However, if you skip Part D without other drug coverage, you will pay a permanent penalty. Skipping Medigap means you will pay more out of pocket for doctor visits and hospital stays, but there is no penalty for not having it.

What is the difference between Medigap and Medicare Advantage?

Medigap works with Original Medicare (Part A and B) and covers costs that Medicare does not. Medicare Advantage is a different way to get Part A and B coverage through a private insurance company. You cannot have both Medigap and Medicare Advantage at the same time. Medicare Advantage often has lower monthly premiums but higher copays and limits on which doctors you can see.

Can I switch from one Medigap plan to another?

Yes, you can switch Medigap plans once a year. However, if you switch outside your initial six-month open enrollment period, the new insurance company can charge you more or deny you based on your health. Many people switch when their premium goes up or when they want different coverage.

What happens if I do not enroll in Part D when I turn 65?

If you do not have other drug coverage, you will owe a late enrollment penalty on top of your Part D premium for as long as you have Medicare. The penalty is roughly 1 percent of the national average Part D premium per month you were not enrolled. This penalty is permanent and cannot be removed.

Does Part A or Part B cover dental, vision, or hearing?

Original Medicare does not cover routine dental, vision, or hearing care. Some Medicare Advantage plans include these benefits, but Original Medicare with Medigap does not. You can buy separate dental, vision, and hearing insurance, or pay out of pocket for these services.