With Medicare, you have options for how you get your coverage that you determine once you enroll. There are four parts of Medicare: Part A, Part B, Part C and Part D. You can get Part A (hospital insurance) and Part B (medical insurance) through Original Medicare and add Part D (prescription drug coverage), or you can enroll in a Part C (Medicare Advantage) program, which typically bundles Parts A, B and D in one plan.

Each part covers different supplies and services you may need. It’s important to understand Medicare coverage and the options you have for coverage. This includes what is and isn’t covered under the different parts of Medicare, the costs associated with services and supplies, and when and how you can apply for Medicare coverage.

What Are the Different Parts of Medicare?

There are three primary parts of Original Medicare: Part A, Part B and Part D. These parts give you the coverage you need for hospital and medical services and equipment, as well as prescription drug coverage.

Part A (Hospital Insurance)

When you apply for Medicare, you are automatically enrolled in Part A, which covers:

• Inpatient hospital care (including any tests, treatments or surgeries you need while admitted in the hospital)
• Skilled nursing facility care (short-term). You are covered for up to 100 days each benefit period if you qualify for coverage, though coinsurance may apply. To qualify, you must have spent at least three consecutive days as a hospital inpatient within a short time (typically 30 days) of admission to the SNF.
• Nursing home care. Custodial or long-term care is generally not covered.
• Hospice care. Your provider must determine you are terminally ill, and you must elect to receive hospice. You’re covered for as long as your provider approves you need care.
• Home health care, including part-time or intermittent skilled nursing care, physical, occupational or speech-language therapy, medical social services, and other services based on your needs and plan of care from your doctor.

Part B (Medical Insurance)

Part B covers medically necessary services or supplies that are needed to diagnose or treat a medical condition, as well as preventive services to help keep you healthy longer.

• Doctors' visits
• Outpatient care, such as emergency room services and same-day surgical procedures
• Lab tests and services
• Diagnostic imaging
• Therapy (physical, occupational, speech-language)
• Diabetes supplies
• Clinical research
• Ambulance services
• Durable medical equipment (DME)
• Mental health services (both inpatient and outpatient)
• Certain prescription medications
• Chemotherapy and radiation
• Annual screenings
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Part D (prescription drug coverage)

Part D covers most outpatient prescription drugs. This coverage is offered through private companies as either a stand-alone plan you purchase separately, or as an included benefit with your Medicare Advantage plan.

Each Part D plan has a list of covered drugs in its formulary. When choosing a drug plan, make sure any prescription drugs you currently take are listed on the formulary. Otherwise, you may have to pay for the cost completely out of pocket.

Part D also covers most vaccines, other than those covered by Part B.

What Is Part C?

You may hear of another part of Medicare: Part C, or Medicare Advantage. Medicare Advantage plans offer an alternative way to receive your Medicare benefits. These plans are offered by private insurance companies who work with Medicare to provide you benefits.

Part C coverage includes the same coverage you’d get with Original Medicare under Part A and Part B, with additional benefits such as:

• Vision
• Hearing
• Dental
• Eyeglasses
• Gym or fitness memberships or programs
• Travel coverage
• Prescription drug coverage included

You can join an MA plan if you have Medicare Parts A and B, and you live within the plan’s service area.

MA plans can have different rules for services and coverage, as well as different out-of-pocket costs. Research your options carefully to ensure you understand coverages and costs.

What Is Medicare?

Medicare is the federal health insurance program for people:

• Who are age 65 or older
• With certain qualifying disabilities (age 18-65+)
• With End-Stage Renal Disease (ESRD)

In addition, you qualify for Medicare if you are a U.S. citizen or permanent legal resident for the past five years.

Original Medicare includes Part A and Part B coverage, and you can see any doctor or supplier that accepts Medicare assignment.

Is Medicare Mandatory?

To avoid penalties or late enrollment fees, you must enroll in Medicare Part A and Part B during your initial enrollment period. Once you enroll in Social Security benefits, you will automatically be enrolled in Part A.

The exception is if you have other creditable coverage, such as through a large employer, that is primary coverage and pays before Medicare does. In that case, you can waive Part B coverage. However, once you lose your employer or other coverage, you must enroll in Part B or risk paying a late enrollment penalty.

You must also have creditable prescription drug coverage.

What Is Not Covered by Medicare Parts A and B?

While most of the services and supplies you need will be covered by Medicare, there are a few things that will not be covered, including:

• Long-term care
• Most dental care
• Eye exams related to prescribing glasses
• Dentures
• Cosmetic surgery
• Acupuncture
• Hearing aids and exams for fitting them
• Routine foot care

You can still receive these services, but you will likely have to pay for them yourself out of pocket unless you have other insurance or coverage, such as Part C Medicare Advantage plan coverage.

How Much Does Medicare Cost?

Part A

• Premium: As long as you or your spouse worked for 10 years paying Medicare taxes, you get Part A coverage with no monthly premium.

If you don’t automatically qualify for premium-free Part A coverage, you are able to purchase it.

• If you paid Medicare taxes for less than 30 quarters, your monthly premium is $506.
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• Deductible: Part A requires you pay a deductible toward inpatient care, which is $1,600 in 2023.

Part B

• Premium: In 2023, the standard monthly premium for Part B coverage is $164.90.

If you’re still working and have an annual income of more than $97,000, or if you’re married and your combined annual income is more than $194,000, your monthly premium may be higher.

• Deductible: In addition to the monthly premium, you will also have to meet an out-of-pocket annual deductible of $226 before medically necessary services will be covered.

Part C

If you enroll in a Medicare Advantage plan, the cost may vary based on a variety of factors. Costs may be associated with:

• Premium: Some Part C plans cover your Part B monthly premium, so you wouldn’t pay anything, but others do not and you are still required to make the monthly payment.
• Your Part C costs. Some plans have a Part C premium, while others do not. Deductibles can also vary by plan.
• Copayments and coinsurance costs can vary.

Part D

Part D plans can also vary in cost based on a number of different factors, including deductibles, premiums, coinsurance, and copays that can vary by plan.

• Premium: In 2023, the national average monthly premium will be about $32.74.
• Deductible: 2023 guidelines also say your deductible cannot be more than $505. However, there are plans that offer a $0 deductible based on the medications you take.
• Coverage Gap: Part D plans have a temporary limit on what the drug plan will cover, called the “coverage gap” or “doughnut hole.” This kicks in after you and your plan have spent a combined $4,660 (in 2023) on Part D supplies. Once you reach the coverage gap, you’ll pay no more than 25 percent of the cost for covered drugs.

Then, once you have paid $7,400 in out-of-pocket costs, you have reached the “catastrophic coverage” and your prescription drug coverage begins paying for most of your drug expenses again.

Part D drugs are split into levels called “tiers,” and each tier has different copayments. Typically, tiers are:

1. Tier 1: preferred generics
2. Tier 2: generics
3. Tier 3: preferred brand names
4. Tier 4: nonpreferred brand names
5. Tier 5: specialty drugs

Late Enrollment Penalties

While Part B and Part D coverage are not mandatory, you may pay a late enrollment penalty if you do not have other creditable coverage and don’t enroll in the coverage before the deadline.

Part A Late Enrollment

In most cases, you are automatically eligible for Part A coverage at no cost. However, if you’re not automatically enrolled and don’t sign up for Part A during your initial enrollment period, you must pay a late enrollment penalty when you do sign up.

The enrollment penalty is 10 percent of the cost of the monthly premium. You’ll have to pay this cost each month for twice the number of years you’re eligible for Part A, but didn’t sign up.

For example, if you waited for 24 months (2 years) to sign up, you’ll pay the penalty each month for 4 years.

Part B Late Enrollment

You are eligible to enroll in Part B beginning the three months before the month you turn 65, the month you turn 65, and three months after the month you turn 65, also known as your Initial Enrollment Period. If you don’t sign up for Part B during this time, you must pay a late enrollment penalty.

Your monthly premium will increase by 10 percent for each 12-month period in which you could have had Part B, but didn’t. This penalty will be added to your Part B monthly payment for as long as you have Part B coverage.

For example, if your monthly premium for Part B is $164.90, you will pay an additional 10 percent, or $16.49 per month. If you don’t have Part B for 24 months when you could have enrolled, you will pay an additional $32.98 per month.

Part D Late Enrollment

Medicare requires you to have at least basic prescription drug coverage within 63 days of when you become eligible for Medicare. If you don’t have proper coverage, you may have to pay a late enrollment penalty. Even if you don’t take any prescription medications when you become eligible for Part D, you should still enroll to avoid a future penalty.

This fee is 1 percent of the average monthly prescription premium costs, multiplied by the number of months you were late in enrolling. This cost will be added to your monthly premium, and the extra cost is permanent.

For example, if the average monthly premium is $32.74, you’d have to pay 1 percent - or $0.33 - per month you didn’t have coverage. If you didn’t have coverage for 24 months, you’d have to pay an additional $8.00 each month for as long as you have Part D.

When and How to Apply for Medicare

There are a few times per year you can enroll in Medicare called enrollment periods.

Initial Enrollment Period

If you’re eligible for Medicare when you turn 65, you are able to sign up during your Initial Enrollment Period. This is a 7-month period surrounding your birthday, including the three months before the month you turn 65, the month you turn 65, and the three months after the month you turn 65.

If you do not pay a premium for Part A, it’s mandatory to enroll unless you also give up your Social Security or Railroad Retirement Board (RRB) benefits.

While part B is not mandatory, in most cases you should only decline Part B if you have group health insurance from an employer you or your spouse is actively working at, and that insurance is primary to Medicare, meaning it pays before Medicare does. Remember, if you do not sign up for Part B when you’re eligible and you do not have other coverage in place, you’ll have to pay a late enrollment period.

You should sign up for Part A and Part B when you’re first eligible to avoid a delay in coverage. If you wait until after the month you turn 65, your coverage may be delayed depending on your birthday.

Special Enrollment Period (SEP)

If you don’t enroll in Part A or B during your Initial Enrollment Period, you may have an opportunity to enroll during a Special Enrollment Period. However, you must meet certain requirements to be eligible, such as:

• If you’re covered under a group health plan based on current employment. In this case, you can sign up for Part A and/or Part B any time as long as you or your spouse is working, and you’re covered by a group health plan through the employer.

If you enroll during an SEP, your coverage will begin the month after Social Security gets your completed request.

You are not eligible for an SEP if you have COBRA or retiree health plan coverage that ends, if you have Veterans Affairs or Individual Health Insurance Marketplace coverage, or if you have End-Stage Renal Disease (ESRD).

General Enrollment Period (GEP)

If you don’t enroll when you’re first eligible, and you don’t qualify for an SEP, you can still enroll during the Medicare General Enrollment Period, from January 1 through March 31. In this case, coverage will begin July 1 of that year.

In most cases, if you enroll during the GEP, you will have to pay a late enrollment penalty for as long as you have Part B.

How to Enroll

To enroll in Medicare, you can:

• Apply online at www.ssa.gov.
• Visit your local Social Security office.
• Call Social Security.
• Call the RRB (if you worked for a railroad).
• If you already have Part A and want Part B, you must complete an Application for Enrollment in Part B.

You do not have to sign up for Original Medicare each year. However, you will have the opportunity each year to review your coverage and make changes to your plan, such as enrolling in a Part C plan or adding Part D drug coverage.

To enroll in Part C or Part D, you must also actively enroll in those plans. You can do so in each of the enrollment periods listed above.