Medicare Parts A, B, C, D: The Alphabet Soup Explained

Medicare is famously confusing. Parts A, B, C, D. Original Medicare versus Medicare Advantage. Medigap supplements. IRMAA surcharges. For most people approaching 65, it feels like learning a new language. Let's decode it, piece by piece.

The Big Picture: Two Paths

Before diving into the parts, understand that you'll choose one of two basic approaches:

Now let's understand each part.

Part A: Hospital Insurance

Part A covers inpatient care: hospital stays, skilled nursing facilities (limited), hospice, and some home health care.

Cost: Most people pay $0 in premiums (if you or your spouse paid Medicare taxes for 10+ years). But there are significant deductibles and copays:

• Hospital deductible: $1,676 per benefit period (2025)
• Days 1-60: $0 after deductible
• Days 61-90: $419/day coinsurance
• Days 91+: $838/day (using "lifetime reserve days")

Key point: Part A has significant cost-sharing that can add up quickly for extended hospital stays. This is one reason people buy Medigap supplements.

Part B: Medical Insurance

Part B covers outpatient care: doctor visits, preventive services, lab tests, outpatient surgery, durable medical equipment, mental health services, and more.

Cost: Standard premium is $185/month in 2025, but higher earners pay more (IRMAA surcharges, more on this below). After meeting the annual deductible ($257 in 2025), you typically pay 20% of Medicare-approved amounts.

The 20% problem: Part B has no out-of-pocket maximum. If you have a $100,000 surgery, you owe $20,000. This unlimited exposure is why Medigap supplements exist.

Part C: Medicare Advantage

Medicare Advantage plans are offered by private insurers and replace Original Medicare. They must cover everything Parts A and B cover, and most include Part D (drug coverage). Many add extras like dental, vision, hearing, and fitness benefits.

Pros:

• Lower premiums (some plans have $0 premiums beyond Part B)
• Out-of-pocket maximums (unlike Original Medicare)
• Extra benefits not covered by Original Medicare
• Simplified billing, one plan, one card

Cons:

• Network restrictions, must use plan doctors and hospitals
• Prior authorization often required for procedures
• Coverage can change annually
• May limit access to specialists
• Harder to switch to Original Medicare + Medigap later

Best for: Those who prefer lower premiums, don't mind network restrictions, and want extra benefits. Works well if you stay in one area and plan providers are in-network.

Part D: Prescription Drug Coverage

Part D covers prescription medications through private insurance plans. If you have Original Medicare, you need a standalone Part D plan. If you have Medicare Advantage, drug coverage is usually included.

How it works: Plans have formularies (lists of covered drugs) organized into tiers. Generic drugs are cheapest; specialty drugs are most expensive. Coverage varies dramatically by plan.

The coverage phases:

1. Deductible: Up to $590 in 2025 (some plans have $0)
2. Initial coverage: You pay copays/coinsurance until total drug costs reach $5,030
3. Coverage gap (donut hole): Largely eliminated. You pay 25% for brand-name and generic drugs
4. Catastrophic: After $8,000 out-of-pocket, you pay $0 (new for 2025)

Critical: Review Part D plans annually. Formularies change, and your medications may move tiers or be dropped entirely.

Medigap (Medicare Supplement) Plans

Medigap plans are sold by private insurers and cover cost-sharing gaps in Original Medicare, deductibles, copays, and coinsurance. They only work with Original Medicare, not Medicare Advantage.

Standardized plans: Plans are labeled A, B, C, D, F, G, K, L, M, N. Each letter covers specific gaps. Plan G is most popular for new enrollees (Plan F is no longer available to those new to Medicare after 2020).

Critical enrollment window: Your 6-month Medigap Open Enrollment Period begins when you're 65+ AND enrolled in Part B. During this window, insurers must accept you regardless of health. After it closes, you may be denied coverage or charged more for pre-existing conditions.

IRMAA: The High-Income Surcharge

If your Modified Adjusted Gross Income exceeds certain thresholds (based on your tax return from 2 years prior), you pay Income-Related Monthly Adjustment Amounts on Parts B and D.

2025 thresholds (single filers):

• Up to $106,000: Standard premiums
• $106,000-$133,000: +$74/month Part B
• $133,000-$167,000: +$185/month Part B
• $167,000-$200,000: +$295/month Part B
• $200,000-$500,000: +$406/month Part B
• Over $500,000: +$443/month Part B

Similar surcharges apply to Part D. For high earners, IRMAA can add $6,000+ annually to Medicare costs.

Enrollment Timing

Initial Enrollment Period (IEP): 7 months surrounding your 65th birthday (3 months before, birthday month, 3 months after). Enroll in Parts A and B during this window to avoid penalties.

If still working: You can delay Part B without penalty if you have employer coverage. Enroll within 8 months of leaving that coverage.

Annual Enrollment Period (AEP): October 15 - December 7 each year. Change Part D plans or switch between Original Medicare and Medicare Advantage.

Late enrollment penalties: Part B penalty is 10% of premium for each 12-month period you could have had coverage but didn't. Part D penalty is 1% of national base premium per month of delay. These penalties last for life.

The Decision Framework

Choose Original Medicare + Medigap if:

• You want maximum flexibility to see any doctor/hospital that accepts Medicare
• You travel frequently or split time between locations
• You can afford higher premiums for predictable costs
• You value the ability to see specialists without referrals

Choose Medicare Advantage if:

• You're comfortable with network restrictions
• You prefer lower premiums
• You want dental, vision, and hearing coverage
• You stay in one geographic area
• You're healthy and don't anticipate heavy medical needs