Medicare Basics: Parts A, B, C, and D Explained

Medicare is the US federal health insurance program primarily serving Americans aged 65 and older, along with certain younger people with disabilities or end-stage renal disease. It has four distinct parts, each with its own coverage, costs, and enrollment rules. Understanding all four before your 65th birthday is essential — the enrollment decisions you make can create lifetime penalties or leave gaps in coverage that cost thousands.

This guide walks through each Medicare part with specific 2024 costs, deadlines, and the coordination decisions that trip up most enrollees. All figures come from the Centers for Medicare & Medicaid Services (CMS) and are updated annually — verify current specifics at Medicare.gov before making enrollment decisions.

Part A: Hospital Insurance

Medicare Part A covers inpatient hospital care, skilled nursing facility care (limited), hospice care, and some home health services. Most people pay no monthly premium for Part A because they or their spouse paid Medicare taxes for at least 10 years (40 quarters) during their working career. Those without qualifying work history can buy Part A: $278/month with 30-39 quarters of work, or $505/month with fewer than 30 quarters (2024 amounts).

Part A has a deductible per benefit period, not per year — $1,632 in 2024. A benefit period starts when you enter a hospital and ends after 60 consecutive days without inpatient care. You could theoretically pay multiple Part A deductibles in a single year if you have multiple separate hospitalizations. Coinsurance kicks in after 60 days ($408/day for days 61-90) and after 90 days ($816/day using "lifetime reserve days").

Skilled nursing facility coverage under Part A is limited: 100 days per benefit period, with the first 20 days at $0 and days 21-100 at $204/day (2024). This is not the same as long-term custodial nursing home care, which Medicare does not cover — that requires Medicaid (income-based) or long-term care insurance purchased privately.

Part B: Medical Insurance

Medicare Part B covers outpatient care: doctor visits, preventive services, ambulance services, mental health, durable medical equipment, and some home health. Unlike Part A, Part B has a monthly premium. The standard 2024 premium is $174.70/month, deducted from Social Security if you receive benefits. Higher-income enrollees pay more through IRMAA (Income-Related Monthly Adjustment Amount) — up to $594/month for individuals earning over $500,000.

Part B has an annual deductible ($240 in 2024) and typically 20% coinsurance for approved services — with no annual out-of-pocket maximum. A single serious illness can generate thousands in coinsurance charges. This is why most Medicare beneficiaries purchase either Medigap supplemental insurance (private) or enroll in Medicare Advantage (Part C) to cap out-of-pocket exposure.

The Part B late-enrollment penalty is 10% of the standard premium for each 12-month period you were eligible but did not enroll — added to your premium for life. Someone enrolling 3 years late pays 30% more forever. Exception: if you have creditable employer coverage from an employer with 20+ employees, you can delay Part B without penalty and enroll in a Special Enrollment Period when that coverage ends.

Part C: Medicare Advantage

Medicare Advantage plans (Part C) are private insurance alternatives to Original Medicare (Parts A + B). Enrolling in a Part C plan replaces Original Medicare — you get all Part A and Part B benefits through the private insurer, typically with additional benefits like Part D drug coverage, dental, vision, hearing, and gym memberships bundled in.

Part C plans usually have lower monthly premiums than Medigap + Original Medicare — sometimes $0 additional premium beyond the Part B premium — but with network restrictions (HMO or PPO), prior authorization requirements, and county-specific availability. Out-of-network care may not be covered at all in HMO plans. Referrals to specialists are often required.

The trade-off: Part C offers more benefits and lower premiums but less flexibility. Original Medicare + Medigap costs more monthly but lets you see any provider in the US who accepts Medicare, with predictable coverage. Choose Part C if you value low premiums and additional benefits; choose Original + Medigap if you value provider flexibility, travel, or specialist access without prior authorization.

Part D: Prescription Drug Coverage

Medicare Part D covers prescription drugs. You can get Part D two ways: a standalone Part D plan combined with Original Medicare, or bundled into a Medicare Advantage plan (MAPD). Standalone Part D premiums typically range from $10-100/month depending on plan and location. Higher-income enrollees pay IRMAA surcharges on top.

Part D has a complex coverage structure. In 2024: annual deductible up to $545, then initial coverage until total drug costs reach $5,030, then the "coverage gap" (formerly donut hole, now largely eliminated) where you pay 25% of costs, then catastrophic coverage where you pay $0 for the year (major SECURE 2.0 improvement). By 2025, out-of-pocket drug costs will be capped at $2,000 annually for all Part D beneficiaries.

The Part D late-enrollment penalty is 1% of the "national base beneficiary premium" per month of delay — added for life. Someone delaying 24 months pays approximately 24% more forever. Enroll during your Initial Enrollment Period even if you take no medications; changing later has permanent cost consequences.

Enrollment periods and deadlines

Initial Enrollment Period (IEP): The 7-month window centered on your 65th birthday month — 3 months before, your birthday month, 3 months after. This is when you should enroll in Parts A, B, and either a Part C or Part D plan. Missing this window creates late-enrollment penalties on Parts B and D.

General Enrollment Period (GEP): January 1 to March 31 each year, for those who missed their IEP. Coverage starts the month after enrollment. Late-enrollment penalties apply.

Special Enrollment Period (SEP): Available when specific life events trigger — losing employer coverage, moving out of your Part C plan area, becoming eligible for Medicaid, etc. SEP typically lasts 8 months and avoids late-enrollment penalties.

Annual Enrollment Period (AEP): October 15 to December 7 each year, when you can switch between Original Medicare and Medicare Advantage, switch Part C plans, add/change/drop Part D plans. Changes take effect January 1.

Medicare Advantage Open Enrollment: January 1 to March 31, when you can switch from one Part C plan to another or back to Original Medicare with a standalone Part D.

The four biggest Medicare mistakes

The first common mistake is missing the Initial Enrollment Period while still working with employer coverage. Employers with fewer than 20 employees typically become secondary to Medicare at 65 — meaning if you delay Medicare, you may have uncovered care with no way to recover. Verify with HR whether your employer coverage is primary or secondary at 65, in writing.

The second mistake is choosing Medicare Advantage without checking provider networks. Cancer specialists, teaching hospitals, and specialty centers may not be in-network. Verify all your current providers accept your specific Part C plan before enrolling. The lowest-premium plan is not the right plan if it excludes your oncologist.

The third mistake is skipping Part D because you take no medications. The lifetime late-enrollment penalty means even minor future prescription needs will cost more forever. Enroll in the cheapest available Part D plan during your IEP; you can change annually during AEP as needs evolve.

The fourth mistake is enrolling in Medicare without coordinating with an active HSA. Any Medicare enrollment (including premium-free Part A) permanently disqualifies further HSA contributions. If you plan to continue working past 65 and want to keep contributing to an HSA, delay Medicare enrollment entirely (only possible if your employer coverage qualifies for the SEP protection).