The Four Parts of Medicare: A, B, C, D

Medicare offers important assistance to seniors in paying their medical expenses, but despite what many believe, healthcare under Medicare is not free. In fact, there are four parts to Medicare coverage, and you may have to pay for different types of healthcare.

Whether you're currently covered by Medicare or thinking about your future healthcare needs, it's important to understand how the four parts of Medicare work, so that you can make smart decisions for your future.

What Are the Parts of Medicare That Cover Healthcare Expenses for Seniors?

There are four different parts of Medicare that cover senior healthcare needs:

• Medicare Part A: Pays for hospital care, nursing home care, and home healthcare (nursing homes and home healthcare are only covered under limited circumstances).
• Medicare Part B: Pays for routine healthcare, including doctor visits, diagnostic medical tests, and medical equipment seniors may need as they age.
• Medicare Part C: Also known as Medicare Advantage, can replace Medicare Parts A and B coverage by providing coverage through a network of private health insurance providers. Most Medicare Part C plans also pay for some prescription drugs.
• Medicare Part D: Provides prescription drug coverage.

Insurers providing coverage under Medicare Part C have to comply with certain guidelines and coverage requirements, but they have the flexibility to cover different types of healthcare needs. In fact, many Medicare Part C plans provide more comprehensive coverage than Parts A and B, which are collectively referred to as traditional Medicare.

Some seniors may want additional health insurance coverage, such as a Medigap plan, to supplement traditional Medicare. You can buy Medigap plans along with Medicare Parts A, B and D. Medigap plans can pay for additional services that traditional Medicare doesn't cover, or they may provide help paying some of traditional Medicare's coinsurance costs.

What is Medicare Part A?

Let's go more in depth. Medicare Part A is available if you are 65 years old and receiving Social Security benefits or Railroad Retirement Benefits, and you'll be signed up automatically. Otherwise, you can apply on your own. Most seniors do not pay premiums for Medicare Part A coverage. However, if you didn't pay enough Medicare taxes during the years you were working, you'll have to pay premiums for Medicare Part A.

If you are not automatically enrolled, you must sign up for Medicare Part A during a seven-month period that begins three months before you turn 65 and extends for three months after you turn 65. This period is called the Medicare initial enrollment period. If you miss the Medicare initial enrollment period, you can sign up during a general enrollment period each year. General enrollment runs from January 1 to March 31.

If you miss your Medicare initial enrollment period, you could face a premium penalty equal to 10% of the current Medicare Part A premium. This penalty will need to be paid for twice the number of years you didn't enroll when you were eligible for coverage. Only those who pay Medicare Part A premiums will owe this penalty.

While most people pay no premiums for Medicare Part A, you have to meet your deductible before Medicare Part A begins paying benefits. If you spend more than 60 days in the hospital during each benefit period, there is also coinsurance to pay, which is a percentage of your medical bill that you must pay after your deductible is met.

Medicare covers nursing home and long-term care only if you need skilled medical services provided by trained professionals. It won't cover any type of custodial care, which includes routine assistance with daily activities such as eating, using the bathroom, or getting dressed.

What is Medicare Part B?

Although Medicare Part A doesn't charge monthly premiums for most enrollees, Medicare Part B does. You'll be charged a standard monthly premium until you reach a specific income threshold. Individuals or couples filing jointly who earn more than that threshold will have to pay income-based surcharges.

Medicare Part B has a deductible of $198. After you've paid the deductible, you'll pay a 20% coinsurance cost, which means you could end up paying a substantial amount of money if you require care.

If you're receiving Social Security when you turn 65, you should be automatically enrolled in Medicare Part B. If you are not enrolled automatically, you must enroll during your Medicare initial enrollment period, or you will pay higher premiums. Premiums will increase by 10% for each full year you weren't enrolled after your initial enrollment. This penalty is assessed the entire time you have Part B coverage. If you meet certain conditions for the Special Enrollment Period, you may be able to enroll later without paying higher premiums.

What are Medicare Part C and Medicare Part D?

Medicare Part C and Medicare Part D are optional. Premiums vary by plan, as do deductibles and coverage limitations. You are allowed to sign up for Medicare Part C and Medicare Part D during your Medicare initial enrollment period. You can also sign up during annual open enrollment periods or during special enrollment periods, which can be triggered by certain life events.

If you allow Medicare Part D coverage to lapse for 63 or more days after you enroll and you do not have other prescription drug coverage that matches Medicare prescription drug coverage, you will be charged a penalty for late enrollment.

Medicare Part D does have a coverage gap under most plans, which you will fall into after exceeding a certain amount of prescription spending. Once you spend a certain amount on covered prescription drugs under your plan, you enter the coverage gap and could end up paying up to 25% of the plan's covered cost for covered name-brand prescription drugs and up to 25% of the cost of generic drugs.

You'll have to pay these costs until you hit your out-of-pocket spending limit. At that point, catastrophic coverage will kick in and you'll pay only small coinsurance or copays.

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Our Expert Reviewer

Patty Caballero and her team of consultants together have more than 35 years of health insurance knowledge working for some of the biggest health insurance companies in the US. She has knowledge in building brands and strategic initiatives to help consumers better understand their health benefits.