The 4 Parts of Medicare: Everything You Need to Know

It’s never too early to start learning about Medicare. If you turn 65 within the next year or need a refresher on how Medicare works, you’re in the right place! We will review the four parts of Medicare and touch on Medicare Supplement plans. After reading this, you’ll have a strong grasp of Medicare and know enough to have a smooth transition into the program.

Part A: Hospital Insurance

Part A is often referred to as hospital insurance or inpatient insurance. It helps pay for your room and board expenses during an inpatient stay at either a hospital or skilled nursing facility. Your coinsurance costs under Part A depend on which of those two facilities you are admitted to. 

In either scenario, you will first need to pay the $1,600 (in 2023) deductible. The Part A deductible works differently than others you may have had. It applies to every benefit period. A benefit period begins on the day of your admission and ends when you have been out of either facility for 60 consecutive days. So, yes, you could be responsible for it more than once each year.

After meeting your deductible, the first 60 days in a hospital are paid for by Medicare. After that, your coinsurance cost per day is $400, all the way to day 90. Beginning on day 91, you will be responsible for the entire cost of services unless you have any of the 60 lifetime reserve days remaining. Using one of those days will cost $800 per day. In a skilled nursing facility, Medicare pays for the first 20 days, and you pay $200 per day from day 21 until day 100.

That sounds like a lot, doesn’t it? It is. However, there are two pieces of good news. First, most Medicare beneficiaries do not pay a premium for Part A. You will enjoy premium-free Part A if you or your spouse has paid Medicare taxes for at least ten years (or 40 quarters). If you have not met that requirement, you will pay one of two amounts.

• Between 30 and 39 quarters: $278 per month
• Less than 30 quarters: $506 per month

The second piece of good news is that there are additional coverage options you can enroll in to help with these out-of-pocket costs. We’ll discuss those after reviewing your coverage under Medicare Part B.

Part B: Medical Insurance

Medicare Part B is also called medical insurance or outpatient insurance. It helps pay for services like doctor’s appointments, durable medical equipment (DME), diagnostic tests and images, and many preventive services like screenings and vaccines.

Part B has an annual deductible. In 2023, the deductible is $226. Once that has been paid, Part B offers 80% coverage on Medicare-approved services. Beneficiaries are responsible for the other 20%. Many preventive services are covered at 100%.

Unlike Part A, everyone pays a premium for Part B. The standard premium most people pay is $164.90 per month. However, individuals who earn higher incomes pay an additional premium called the Income-Related Monthly Adjustment Amount (IRMAA). In addition, those with low incomes can apply for financial assistance to pay the Part B premiums.

Part C: Medicare Advantage

Medicare Advantage is also called Medicare Part C. It is one of two ways beneficiaries can choose to supplement their coverage under Parts A and B. There is much to learn about Medicare Advantage, but we’ll review the basics today.

Private insurance companies offer Medicare Advantage plans. They bundle the coverage of Part A and Part B, add in extra benefits, and provide everything in one plan. So instead of getting your insurance benefits from the federal Medicare program, enrollees will get them directly from the private insurance company.

Many insurance companies offer Part C plans, and the benefits will vary significantly from one plan to the next. For example, some plans offer prescription drug coverage, vision and hearing benefits, dental coverage, gym memberships, and more. These plans are even more attractive because they often come with very low monthly premiums. However, there are still deductibles, copayments, and coinsurance costs that you’ll need to keep in mind.

There are four kinds of Medicare Advantage plans. 

1. Health Maintenance Organizations
2. Preferred Provider Organizations
3. Private Fee-for-Service Plans
4. Special Needs Plans

The rules and provider networks are different under each one, so it’s important to understand how each works before enrolling.

Part D: Prescription Drug Plans

Medicare Part D includes prescription drug plans. Like Part C plans, they are offered by private insurance companies. Beneficiaries can enroll in Part D in one of two ways: Either in a stand-alone Part D plan or as part of a Medicare Advantage plan.

In either scenario, coverage works the same way. Every plan has a deductible, coinsurance amounts, and a drug formulary. The drug formulary is the list of medications covered under the plan. The medications are categorized into drug tiers. Medications in lower tiers cost less than medications in higher tiers. Beneficiaries pick a drug plan based on what is available in their zip code and the current medications they need covered.

Medicare Supplement Plans

Medicare Supplement plans, also known as Medigap plans, are not considered a “part” of Medicare. However, we mention them here because they are the second way that beneficiaries can supplement their coverage under Original Medicare.

Medicare Supplements act as secondary insurance, with Parts A and B remaining the primary. A Medicare Supplement will pick up some or all of the costs that remain after Parts A and B have paid. There are about ten Medigap plans to choose from: Plans A, B, C, D, F, G, K, L, M, and N.

The most important thing to understand about Medigap plans is that they are standardized. That means that, unlike Medicare Advantage plans, each plan remains the same, regardless of which insurance company offers the plan. For example. Plan G from Company A has the same benefits as Plan G from Company B. 

Premiums are based on your age, gender, location, and tobacco status, typically increasing yearly. Because premiums are the only thing that differs from one company to the next, it’s important to enlist the help of a local Medicare advisor to shop at multiple carriers and find you the most competitive rate.

Whew! That was a lot of information to take in. If you feel overwhelmed, you are not alone. Medicare has many working parts, and it can be hard to understand how they all work together to provide comprehensive health coverage. Plus, you don’t have to learn all of this on your own. The licensed agents at Local Medicare Specialists can help educate you on the program and search for plans that offer the coverage you need.