Learn About Medicare Coverage Types and Options

Original Medicare Parts A and B: Understanding Hospital and Medical Coverage

Original Medicare consists of two main parts that work together to cover different types of healthcare services. Part A focuses on hospital care, while Part B covers medical services you receive outside of a hospital setting. Together, these two components form the foundation of how Original Medicare works.

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Part A hospital insurance covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. When you are admitted to a hospital as an inpatient (meaning you stay overnight), Part A covers your room, meals, nursing care, and most medical supplies used during your stay. The coverage begins on the day you are admitted and continues for up to 90 days per benefit period. If your hospital stay extends beyond 90 days, you have access to 60 additional "lifetime reserve days" that can be used throughout your lifetime, though these are limited. For skilled nursing facilities—places that provide care beyond what a regular nursing home offers—Part A covers up to 100 days per benefit period, but only if you were first hospitalized for at least three consecutive days.

Part B medical insurance covers doctor visits, outpatient services, diagnostic tests, and preventive care. This includes routine office visits with your primary care doctor or specialists, X-rays, blood tests, and screenings such as mammograms and colonoscopies. Part B also covers durable medical equipment like wheelchairs, oxygen equipment, and walkers when prescribed by a doctor. Mental health services, including therapy and psychiatric visits, are covered under Part B. Additionally, Part B includes preventive services that Medicare covers without charging you a copayment or coinsurance, such as annual wellness visits, flu shots, and certain cancer screenings.

Both Part A and Part B involve cost-sharing, meaning you pay some expenses out of your own pocket. For Part A, you pay a deductible for each benefit period when you are admitted to a hospital. In 2024, this deductible is $1,632. For skilled nursing facilities, you pay coinsurance (a daily amount) after the first 20 days. Part B requires you to pay an annual deductible—$240 in 2024—and then you typically pay 20% of the cost of covered services after the deductible is met. You also pay a monthly premium for Part B, which is automatically deducted from your Social Security check if you receive benefits, or you receive a bill if you do not.

One important limitation of Original Medicare is that it does not cover prescription drugs. If you take medications regularly, you will need to enroll in a separate Part D prescription drug plan or choose a Medicare Advantage plan that includes drug coverage. Additionally, Original Medicare does not cover dental care, vision care, or hearing aids, though some preventive vision and hearing services may be available through other programs.

Practical takeaway: Part A and Part B together provide substantial hospital and medical coverage, but you should understand the specific deductibles, coinsurance amounts, and what services are not covered—particularly prescription drugs—so you can plan for additional coverage options that may meet your needs.

Medicare Advantage Plans: Private Insurance Alternatives to Original Medicare

Medicare Advantage plans, also called Part C, are health insurance plans offered by private insurance companies that are contracted with Medicare. These plans provide an alternative way to receive your Medicare benefits. Instead of using Original Medicare Part A and Part B, you enroll in a Medicare Advantage plan, and that private insurance company becomes responsible for providing your hospital and medical coverage. Most Medicare Advantage plans also include prescription drug coverage, so you would not need to enroll in a separate Part D plan.

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The primary appeal of Medicare Advantage plans is that they often have lower out-of-pocket costs than Original Medicare when you use doctors and hospitals within the plan's network. Many plans charge zero monthly premiums in addition to your Part B premium, though some do charge an extra monthly fee. These plans typically include an annual out-of-pocket maximum—a cap on the total amount you will pay for covered services in a year. Once you reach this maximum, the plan pays 100% of your covered services for the rest of that year. In 2024, the maximum out-of-pocket limit is $8,000 for in-network services. This differs significantly from Original Medicare, which has no annual out-of-pocket maximum, meaning your costs could theoretically continue to rise indefinitely.

Medicare Advantage plans come in different types, each with different rules about which doctors and hospitals you can use. Health Maintenance Organization (HMO) plans require you to choose a primary care doctor and get referrals to see specialists. You must use doctors and hospitals in the plan's network, except in emergencies. Preferred Provider Organization (PPO) plans offer more flexibility—you can see any doctor or hospital, but you pay less if you use providers in the network. Point of Service (POS) plans combine features of both HMOs and PPOs. Exclusive Provider Organization (EPO) plans are similar to PPOs but may have different rules about out-of-network coverage.

Most Medicare Advantage plans include dental and vision benefits, which Original Medicare does not cover. This can mean coverage for teeth cleaning and exams, basic fillings, and routine eye exams and glasses. Some plans also offer fitness program benefits, allowing you to join participating gyms or wellness programs at no extra cost. Many plans include coverage for transportation to medical appointments, especially for people with limited mobility or chronic conditions.

However, Medicare Advantage plans have restrictions that Original Medicare does not. If you travel outside your plan's service area, you may not have coverage except in emergencies. This can be problematic if you spend winters in another state or travel frequently. Additionally, if you need a specialist or specific procedure, you may need prior authorization from the plan—meaning the plan must approve the treatment before you receive it—or you could face higher costs or denial of coverage. Some people also find that the network of doctors available in their area is smaller with Medicare Advantage than what they could access with Original Medicare and a Medigap policy.

Another consideration is that Medicare Advantage plan networks and benefits change yearly. Your doctor might leave the network, or the plan might add new benefits or change cost-sharing amounts. You have the opportunity to review your plan each year during the annual enrollment period and switch to a different plan if your current plan no longer meets your needs.

Practical takeaway: Medicare Advantage plans can offer lower premiums and out-of-pocket costs along with additional benefits like dental and vision coverage, but they require you to use specific networks of doctors and hospitals, which may limit your choices or create challenges if you travel or live in multiple states.

Prescription Drug Coverage Through Part D and Medicare Advantage

Prescription drug coverage is a critical component of Medicare for people who take regular medications. There are two main ways to obtain prescription drug coverage: through a standalone Part D prescription drug plan if you have Original Medicare, or as part of a Medicare Advantage plan that includes drug benefits. Understanding how these options work helps you manage medication costs effectively.

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Part D standalone plans are offered by private insurance companies contracted with Medicare. If you have Original Medicare, you enroll in a Part D plan separately from your hospital and medical coverage. These plans cover a wide range of prescription medications, from common drugs like blood pressure medications and diabetes treatments to more specialized and expensive drugs for conditions like cancer or rheumatoid arthritis. Each Part D plan maintains a formulary—a list of covered medications—and these formularies vary between plans. One drug might be covered by Plan X but not by Plan Y, so reviewing the formulary for any medications you currently take is important before enrolling.

Part D plans have a standard benefit structure with several cost phases. First, you pay a monthly premium, which varies depending on the plan you choose. In 2024, the average Part D premium is approximately $34 per month, though premiums can range from about $5 to over $100 depending on the plan and your location. After paying your premium, you also pay an annual deductible before the plan begins to help pay for your medications. The 2024 deductible is $545. Once you meet the deductible, you enter the initial coverage phase, where you pay a copayment or coinsurance for each prescription. The plan pays its share, and you pay your share, typically ranging from $5 to $50 per medication depending on the drug's tier.

As you and your plan spend money on covered drugs, you move through different phases of coverage. After you and your plan have spent $6,350 on covered drugs in 2024, you reach the coverage gap, sometimes called the "donut hole." In this phase, you pay a higher percentage of drug costs—