The Medicare program has been around for over 50 years. In that time it has evolved and been added onto repeatedly. This situation has created a program that has grown beyond its original scope, requiring it to be divided into four main parts.
What are the different parts of Medicare? Answering that is easy: Part A, Part B, Part C, and Part D. Explaining what each of the 4 parts of Medicare does is a bit more complicated, however.
Parts A, B, and D each provide coverage for a different type of medical need: hospital bills, medical services, and prescription drugs, respectively.
Medicare Part C refers to “Medicare Advantage”. It is private insurance coverage that can replace the coverage provided by Parts A, B, and D.
Those brief descriptions can help you get oriented to the 4 parts of Medicare, but they don’t tell the whole story. To answer more questions like, “What are the parts of Medicare, and what does each cover?” take a look at the descriptions of each of the four parts below.
You can also learn more about each specific part in-depth — including enrollment requirements, premiums, deductibles, and other costs — when you click on their respective title within the following list:
What Are the Parts of Medicare? “Original Medicare” Parts A & B Explained
The legislation that created Medicare was passed in July 1965 by an act of Congress and signed into law by President Lyndon B. Johnson. Former President Harry S Truman and his wife former First Lady Beth Truman became the first Medicare beneficiaries.
At the time Medicare was created, it consisted of two main parts:
- Medicare Part A provided insurance coverage for hospital stays
- Medicare Part B provided insurance coverage for doctor’s services, outpatient appointments, treatments, surgery, medical devices, and certain prescription drugs
Both Medicare Part A and Part B have changed since their inception in 1965, but their central purpose has stayed the same. Accordingly, they are often referred to as “Original Medicare” coverage.
Original Medicare coverage differs from other forms of Medicare in a few key ways. First, both programs are provided under the direct administration of the federal government, and they are funded by taxpayer contributions. Most retirees are automatically enrolled in Medicare when they register for their Social Security benefits.
Both programs are intended to provide low-cost coverage in the event of emergencies or medically necessary appointments, which now includes preventative services. Medicare Part A is provided with no monthly premiums needed for most beneficiaries who worked and paid taxes for at least 10 years.
Part A and Part B are explained in greater detail below, followed by the private insurer-provided components of Medicare: Part C and Part D.
Medicare Part A — “Hospital Insurance”
Medicare Part A is often referred to as “hospital insurance,” which can be a helpful way to distinguish it. It covers:
- Inpatient care provided in a hospital
- Skilled nursing facility care
- Inpatient care provided at a skilled nursing facility (but not custodial or long-term care)
- Home health care
- Hospice care
Most doctors’ services, tests, or procedures performed during a hospital stay are not covered by Part A. Instead, think of Part A as covering your “room and board” costs while you’re in the hospital.
Since hospital stays can be quite expensive, this coverage can save older adults thousands or even tens of thousands after an unexpected adverse health event.
Medicare Part A is the only component of Medicare that you are required to sign up for upon retirement. If you choose not to have Part A, you will forfeit any access you have to Social Security benefits.
Anyone enrolled to receive Social Security benefits will automatically be enrolled in Medicare Part A and Part B, with some exceptions.
Medicare Part B — “Medical Services Insurance”
Medicare Part B is an optional component that can be chosen when you first enroll in Medicare. It provides coverage for what most people think of when they are worried about having insurance: medical services, procedures, and tests.
More specifically, Part B covers:
- Medically necessary services, including diagnosis and treatment of any medical conditions
- Medical supplies, devices, and durable medical equipment (DME)
- Preventive health care services, including early detection
- Clinical research
- Ambulance services
- Mental health services, including both in-patient and out-patient
- Getting a second opinion prior to surgery
- Certain prescribed outpatient drugs
Medicare Part B can cover — or not cover — many different things that vary according to current federal and state laws, national decisions made by the Centers for Medicare and Medicaid Services (CMS), or policies enacted locally by companies that process Medicare claims.
You can always ask your provider if a specific service or item will be covered, or you can check the Medicare.gov coverage website.
Electing to not receive Medicare Part B coverage when you retire can mean you get hit with a penalty should you decide to add it later on, so be careful when deciding whether or not to sign up for Part B.
Medicare Part C — “Medicare Advantage”
Medicare Part C is optional coverage now typically referred to as “Medicare Advantage”.
It differs from the “Original Medicare” Part A and Part B in that it is provided by a private health insurance company. In most cases, it completely replaces your Part A and Part B Medicare coverage, meaning you’ve switched from public health insurance to private while getting most of the same benefits and guarantees as Medicare recipients.
Most Medicare Part C plans also include Part D coverage, which covers the cost of certain prescription drugs.
Your Part C coverage will likely require you to visit doctors and facilities that are within the plan’s network. If you opt to use an HMO network, you will have to work through a primary care physician and receive referrals.
You can think of Medicare Part C as similar to all-in-one group insurance plans provided traditionally through employers. You’ll present one ID card at every hospital, doctor’s office, or pharmacy within your plan’s network.
Note that while a private insurer will be providing coverage for your Medicare Advantage plan, you must remain enrolled in Medicare Part A and Part B. Staying in these programs guarantees that your insurer will be reimbursed for certain coverage by the respective plan while keeping costs low thanks to Medicare-negotiated pricing.
Medicare Part C coverage can be added or changed during open enrollment periods.
Medicare Part D — “Prescription Drug Insurance”
Medicare Part D is another optional form of coverage that can be added onto Part A and Part B. Most Part C plans have Part D coverage, but this is not universal, so always look closely at any Advantage plan you are considering.
The exact drugs covered by Part D vary according to the plan’s specific drug formulary. Read the drug formulary closely to see what is covered, the extent of coverage, and which generic versions of drugs are also included.
Your drug formulary will also affect how much coverage each type of drug will have according to the plan’s “tier list.” Drugs listed on higher tiers will have less coverage and, thereby, be more expensive.
Like Medicare Part B, electing not to have Part D coverage when you first sign up for Medicare can lead to a late enrollment penalty later on. The only exception is if you have another form of prescription drug coverage, such as through an employer, or if you qualify for Medicare’s Extra Help program.
Note that you cannot be enrolled in Part D if you have a Part C plan that includes prescription drug coverage. Read the details of any Part C plan you intend to enroll in carefully, or you could be automatically disenrolled from your Part C coverage.
Get Help Enrolling or Selecting the Right Coverage for You
We apologize if any of the above information is confusing, but the Medicare program is large and complex. It must also meet the needs of a wide variety of people while keeping costs as low as possible.
The result can feel like a tangled web of red tape, but we’re here to help. Simply contact us if you have any questions or need suggestions on what Medicare parts and plans best fit your healthcare requirements now and over the long-term to Protect What’s Ahead.