Medicare Parts A, B, C, and D: Coverage and Costs Explained

The Program That Covers 67 Million Americans—and Confuses Most of Them

Medicare enrolled approximately 67 million beneficiaries in 2024, making it the largest single health insurance program in the United States. Yet surveys consistently show that most Americans approaching 65 cannot correctly identify what each part covers. The consequences of misunderstanding are real: missing an enrollment window can trigger a permanent premium penalty that follows a beneficiary for life. Understanding the four-part structure is not optional for anyone planning retirement healthcare costs.

Part A: Hospital Insurance

Part A covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health services. For most people, Part A is premium-free. If you or your spouse worked and paid Medicare taxes for at least 40 quarters (10 years), you owe $0 per month in Part A premiums. Those with 30–39 quarters pay $278 per month in 2024; those with fewer pay $505 per month.

Part A has a deductible of $1,632 per benefit period in 2024—not per year. A benefit period begins the day you're admitted and ends 60 consecutive days after discharge. Two separate hospitalizations in the same year can each trigger the full deductible.

• Days 1–60: $0 coinsurance after deductible
• Days 61–90: $408 per day coinsurance
• Days 91+: $816 per day (lifetime reserve days)
• Beyond 150 days: beneficiary pays 100% of costs

Part B: Medical Insurance

Part B covers outpatient services: doctor visits, preventive care, lab tests, ambulance services, durable medical equipment, and outpatient procedures. Unlike Part A, Part B always carries a premium.

The standard Part B premium for 2024 is $174.70 per month. High-income beneficiaries pay more through Income-Related Monthly Adjustment Amounts (IRMAA). A single filer with modified adjusted gross income above $103,000 pays surcharges ranging from $69.90 to $419.30 per month on top of the standard premium.

Part B also has an annual deductible of $240 in 2024, after which Medicare covers 80% of approved costs. The beneficiary is responsible for the remaining 20%—with no cap. A single major surgery or cancer treatment can expose a beneficiary to tens of thousands of dollars in 20% coinsurance without supplemental coverage.

Part C: Medicare Advantage

Part C, known as Medicare Advantage, is not a separate benefit category. It is an alternative way to receive all Original Medicare benefits (Parts A and B) through a private insurer contracted with CMS. Plans often bundle in Part D drug coverage and add extras like dental, vision, and hearing—benefits Original Medicare does not cover at all.

About half of all Medicare beneficiaries now choose Medicare Advantage over Original Medicare. Trade-offs exist:

• Advantage plans typically have lower premiums but restrict providers to a network (HMO or PPO)
• Prior authorization requirements can delay or deny care Original Medicare would cover
• Out-of-pocket maximums exist (capped at $8,850 for in-network in 2024 by law), protecting against catastrophic costs—something Original Medicare lacks entirely
• Plans vary dramatically by county; the same insurer's plan in one zip code may differ from an adjacent county's plan

Part D: Prescription Drug Coverage

Part D is optional standalone drug coverage for those on Original Medicare, or it comes bundled with most Advantage plans. Private insurers administer Part D plans under CMS guidelines. Each plan maintains a formulary—a list of covered drugs organized into cost tiers.

The Inflation Reduction Act of 2022 made sweeping changes to Part D, phasing in between 2023 and 2025. Beginning in 2025, the out-of-pocket maximum for Part D is capped at $2,000 per year—a landmark change that previously left beneficiaries exposed to unlimited drug costs in the catastrophic coverage phase.

Premiums and Cost Comparison

Enrollment Windows and Late Penalties

Missing enrollment deadlines creates lasting financial damage. The system has multiple distinct windows.

Initial Enrollment Period (IEP): A 7-month window centered on your 65th birthday—three months before, the month of, and three months after. Enrolling after the IEP triggers late penalties. Part B late enrollment penalty: 10% added to the premium for each 12-month period you were eligible but didn't enroll, permanently. Someone who delays Part B enrollment by three years pays 30% more per month for life.

Part D late enrollment penalty: 1% of the national base beneficiary premium per month of delay, also permanent. In 2024 the base was $34.70, making each month of uninsured delay cost roughly $0.35/month permanently—seemingly small, but it compounds across years of retirement.

• Special Enrollment Period: Available if you delayed due to employer coverage; no penalty applies
• General Enrollment Period: January 1–March 31 each year, for those who missed IEP without a Special Enrollment Period qualifying event
• Annual Election Period (AEP): October 15–December 7; switch, drop, or join Advantage or Part D plans

What Medicare Does Not Cover

Original Medicare has well-known gaps that catch beneficiaries off guard.

Medigap: Filling the Gaps in Original Medicare

Medigap policies—standardized supplemental plans labeled A through N—are sold by private insurers to cover Part A and Part B cost-sharing. Plan G, the most popular for new enrollees since 2020, covers the Part B deductible and all coinsurance, capping out-of-pocket exposure to near zero for covered services. Monthly premiums vary by age and location, often ranging from $80 to $300 per month for a 65-year-old.

Medigap does not work with Medicare Advantage. Beneficiaries must choose: Original Medicare with Medigap plus a standalone Part D plan, or Medicare Advantage (which bundles coverage but restricts networks).

This article is for informational purposes only. Consult a qualified professional for personalized Medicare guidance.