Medicare: Parts A, B, C and D Without the Jargon
Medicare is four letters, two fundamentally different ways of assembling them, a set of deadlines that can penalize you for the rest of your life, and one structural gap that surprises nearly everyone: Original Medicare has no out-of-pocket maximum. None. That single fact drives most of the decisions on this page.
The four parts
| Part | Covers | Cost in broad terms |
|---|---|---|
| A — Hospital | Inpatient stays, skilled nursing after a qualifying stay, hospice, some home health | Usually premium-free with sufficient work history; has a per-benefit-period deductible |
| B — Medical | Doctor visits, outpatient care, preventive services, durable medical equipment | Monthly premium, higher for high incomes; annual deductible then 20% coinsurance with no ceiling |
| C — Advantage | A private plan that replaces A and B, usually bundling D | Frequently low or zero additional premium; network-based, has an out-of-pocket maximum |
| D — Drugs | Prescription coverage through private plans | Monthly premium; now has an annual out-of-pocket cap on drug spending |
Original Medicare has no out-of-pocket maximum. After the Part B deductible you pay 20% of covered services, with no annual ceiling. On a serious illness, 20% of a very large number is a very large number. This is the reason people pair Original Medicare with a Medigap policy, and the reason Medicare Advantage — which does have a maximum — attracts so many enrollees. See Medigap.
The two roads
At 65 you choose between two architectures, and the practical differences are large.
| Original Medicare + Medigap + Part D | Medicare Advantage | |
|---|---|---|
| Provider choice | Nearly any provider accepting Medicare, nationwide | Plan network, usually regional |
| Referrals | Not required | Often required |
| Prior authorization | Rare | Common |
| Monthly cost | Higher — Part B plus Medigap plus Part D | Lower, sometimes zero above Part B |
| Cost when very ill | Predictable and low, with Medigap | Up to the plan's out-of-pocket maximum |
| Extras | None | Frequently dental, vision, hearing, fitness |
The full comparison, including the switching problem that makes this decision less reversible than it looks, is in Medicare Advantage vs Original Medicare.
The deadlines that matter most
Your Initial Enrollment Period runs for seven months around your 65th birthday. Miss it without qualifying coverage from active employment and you can face a Part B late enrollment penalty that is added to your premium permanently — for life, not for a year. Part D has its own smaller but similarly permanent penalty.
The exception that trips people: coverage from a current employer generally protects you, but COBRA and retiree coverage generally do not. That distinction has cost a lot of people a lot of money. Full timeline in Medicare Enrollment.
Drug coverage changed meaningfully
Part D now has an annual cap on what you pay out of pocket for covered drugs, and insulin is capped at $35 a month for Medicare enrollees. There is also an option to spread out-of-pocket drug costs across the year in monthly payments rather than absorbing them at the pharmacy counter. Together these are the most significant improvement to Medicare drug coverage since Part D was created — see also The $35 Insulin Cap.
Medicaid, and having both
Medicaid is a separate program, jointly run with the states, with eligibility and rules that vary enormously by state — including, in some states, work requirements. Many people qualify for both Medicare and Medicaid, which is the best-covered position in the American system and also the most administratively confusing. See Medicaid Eligibility and Dual Eligible.
Frequently Asked Questions
Is Medicare free?
Part A usually has no premium with enough work history. Part B has a monthly premium that rises with income, and Parts C and D have their own. Free is the wrong word.
Do I have to enroll at 65 if I'm still working?
If you have coverage through active employment at a large enough employer, you can generally delay Part B without penalty and enroll later through a special enrollment period. Confirm with your employer's benefits office, in writing, because getting this wrong is permanent.
Does Medicare cover dental, vision or hearing?
Original Medicare largely does not. Many Advantage plans include limited benefits in these areas, which is a substantial part of their appeal.
Does Medicare cover long-term care?
No. It covers limited skilled nursing after a qualifying hospital stay, not custodial long-term care. Medicaid is the main payer for that in the US, after assets are spent down.
Can I change my mind later?
You can switch during the annual periods. The complication is Medigap: outside your initial guaranteed-issue window, insurers in most states can medically underwrite you, which can make going back to Original Medicare with a supplement difficult or expensive.
More about Medicare & Medicaid
Explore all the articles on this topic or head back to the HealCity guides index.
View all guides