Medicare Explained Simply
Everything in one place: the four parts, supplements, Advantage plans and drug coverage.
Original Medicare
The 4 parts of Medicare
At any given time you’ll use either Parts A, B and D (with an optional supplement), or Part C instead. Here’s what each one is.
Part A
Covers inpatient hospital stays, skilled nursing facility care, hospice and some home health care. Most people pay no monthly premium if they paid into Medicare for 40 quarters while working. There is a deductible before Part A pays for a hospital stay, with copays and coinsurance for longer stays.
Part B
Outpatient medical coverage: visits to your primary care doctor and specialists, surgeries, lab work and preventive services. There’s a monthly premium, taken from your Social Security check if you receive one. After a yearly deductible, you pay 20% of costs.
Part C (Medicare Advantage)
An alternative to Original Medicare offered by private insurers, usually HMO or PPO network plans with copays and coinsurance. It becomes your primary coverage, and you keep paying your Part B premium. Many plans include drug coverage and extras.
Part D
Prescription drug coverage, either as a stand-alone plan or inside a Medicare Advantage plan. Plans come from private insurers approved by Medicare. Going without creditable drug coverage can lead to a late-enrollment penalty.
Medicare Supplements
Medicare Supplements (Medigap)
Medigap policies are sold by private insurers to cover costs Original Medicare leaves behind. Medicare pays its share first, then your supplement pays up to the plan’s limit. Because Original Medicare pays only 80% of Part B costs, a supplement can pay the other 20%.
Not covered by Medigap: routine dental, vision and hearing exams, hearing aids, eyeglasses or contacts, long-term or custodial care, and retail prescription drugs.
Plan G and Plan N are the most popular choices. Plan F is available only to people who became eligible for Medicare before 2020.
Medicare Advantage
Medicare Advantage
The upside
- One plan for everything
- Covers what Original Medicare covers, plus emergency and urgent care
- Most plans include drug coverage
- Eligibility isn’t affected by your health or finances
- Many plans add extra benefits
The downside
- You’re limited to your plan’s network, except in emergencies
- Premiums and benefits can change each year
- It can be hard to switch to Medigap later
- Copays and coinsurance apply, up to a yearly out-of-pocket maximum
Prescription Drug Plans (Part D)
Prescription drug plans (Part D)
Part D plans are sold by private insurers approved by Medicare. You can add a stand-alone drug plan to Original Medicare, or get drug coverage inside a Medicare Advantage plan.
- Each plan has a formulary, a list of covered drugs. Check that your medications and pharmacy are included.
- Costs vary by plan: premium, deductible and copays or coinsurance. A yearly out-of-pocket cap now applies to covered drug costs.
- If you go 63 days or more without creditable drug coverage after you’re first eligible, you may pay a lifetime late-enrollment penalty.
- If your income and resources are limited, you may qualify for Extra Help.
Plans and formularies change every year, so it’s worth a review each fall.