Medicare Part A is hospital insurance that covers inpatient stays, skilled nursing facility care, hospice, and some home health services. Part B is medical insurance that covers doctor visits, outpatient care, preventive services, durable medical equipment, and many other services you receive outside a hospital. Together they form what is known as Original Medicare, and understanding the line between them matters because the costs you pay out of pocket differ substantially depending on which part is doing the covering.
What Part A Covers
Part A is sometimes called hospital insurance, which is a fair shorthand but undersells its scope. It picks up the tab for inpatient hospital stays, including a semiprivate room, meals, nursing care, medications administered during your stay, and other hospital services and supplies. If you need surgery and are formally admitted as an inpatient, Part A is the part of Medicare footing the bill. The distinction between “inpatient” and “outpatient” matters more than most people realize, because simply being in a hospital bed does not automatically mean you are an inpatient. Observation status, where you are monitored in the hospital but never formally admitted, is billed under Part B instead, which changes your cost-sharing significantly.
Beyond hospital stays, Part A covers care in a skilled nursing facility after a qualifying hospital stay, hospice care for people who are terminally ill, and some home health care when it involves skilled nursing or therapy rather than custodial help with daily activities. Most people do not pay a monthly premium for Part A because they or a spouse paid Medicare taxes for at least ten years while working. If you do not meet that threshold, you can buy into Part A, but the premium can be steep.
The Three-Day Rule for Skilled Nursing Coverage
One of the most common surprises in Medicare coverage involves skilled nursing facilities. Part A will cover up to 100 days per benefit period in a skilled nursing facility, but there is a catch: under traditional Medicare, you must first have a qualifying inpatient hospital stay of at least three consecutive calendar days before that skilled nursing coverage kicks in.1PubMed Central. Waiving the three-day rule: admissions and length-of-stay at hospitals and skilled nursing facilities did not increase The day you are discharged does not count toward those three days, and neither does any time spent under observation status. So if you spend two nights in the hospital but one of those days was technically observation, you may not qualify.
This rule trips people up regularly. Someone falls, breaks a hip, spends what feels like a long time in the hospital, and then expects Medicare to cover their rehabilitation in a nursing facility. If the formal inpatient admission did not last a full three calendar days, they can be stuck paying the entire skilled nursing bill out of pocket. It is worth asking the hospital directly whether you have been admitted as an inpatient or placed under observation, because the financial consequences are enormous.
Even when you do qualify, Part A does not cover the full 100 days at no cost. The first 20 days are fully covered. Days 21 through 100 require a daily coinsurance payment from you that, as of recent years, runs well over $200 per day. After day 100, Medicare stops covering skilled nursing entirely for that benefit period.
Hospice Care Under Part A
Part A covers hospice care, which is palliative care for people with a terminal illness. To qualify for the Medicare hospice benefit, a physician must certify that you have a life expectancy of six months or less if the disease follows its expected course.2Oxford Medicine Online. Hospice Approach to Palliative Care Once you elect hospice, Medicare covers medications related to your terminal condition, nursing care, physician services, physical therapy, social work, and counseling. It also covers short-term inpatient care for symptom management and respite care to give your caregivers a break.
A common misconception is that choosing hospice means giving up all medical treatment. What actually happens is that you agree to forgo curative treatment for your terminal illness in exchange for comfort-focused care. You can still receive Medicare-covered treatment for conditions unrelated to your terminal diagnosis. And if your condition improves or you change your mind, you can leave hospice and return to standard Medicare coverage at any time. There is no penalty for doing so, and you can re-enroll in hospice later if needed.
What Part B Covers
Part B handles almost everything that happens outside a hospital admission. Doctor visits, outpatient surgery, diagnostic tests, lab work, X-rays, CT scans, MRIs, ambulance services, mental health care, durable medical equipment like wheelchairs and oxygen equipment, and outpatient rehabilitation therapy all fall under Part B. If a doctor orders it and it is medically necessary, Part B probably covers it.
Unlike Part A, Part B requires a monthly premium that most people pay. The standard premium is set annually by the government and is income-adjusted, meaning higher earners pay more through a surcharge known as IRMAA (Income-Related Monthly Adjustment Amount). On top of the premium, Part B has an annual deductible and then typically covers 80 percent of the Medicare-approved amount for most services, leaving you responsible for the remaining 20 percent. That 20 percent coinsurance has no cap under Original Medicare, which is one reason many people buy supplemental Medigap policies.
Preventive Services and Annual Wellness Visits
One area where Part B is particularly generous is preventive care. Since 2011, Medicare has fully covered annual preventive care visits with no deductible or coinsurance required from the beneficiary.3PubMed. Medicare annual preventive care visits: use increased among fee-for-service patients, but many do not participate This includes the “Welcome to Medicare” preventive visit within your first 12 months on Part B and annual wellness visits each year after. These visits are designed to create or update a personalized prevention plan, screen for cognitive impairment, and review your risk factors.
Part B also covers a range of specific preventive screenings at no cost, including mammograms, colonoscopies, flu shots, cardiovascular screenings, diabetes screenings, and certain cancer screenings. The key phrase is “at no cost” when coded as preventive. If a screening colonoscopy turns into a procedure because a polyp is removed, the billing can shift, and you may owe a share. This frustrates people understandably, and it is one of the most complained-about quirks in Medicare billing. The rules here are technical and depend on diagnosis codes, but the practical takeaway is that preventive screenings themselves are free under Part B, while anything classified as diagnostic or therapeutic may carry cost-sharing.
Physician-Administered Drugs and the Part B and Part D Split
Medicare’s drug coverage is split in a way that confuses almost everyone. Part B covers drugs that are administered by a physician or other provider in a clinical setting, such as infusions in an oncology clinic, injections in a doctor’s office, or certain vaccines. Part D, which is a separate prescription drug plan, covers medications you pick up at a pharmacy and take yourself at home. The two parts have entirely different cost structures, formularies, and rules.
This split creates real headaches. A cancer drug given by IV infusion in a clinic is a Part B drug. The same active ingredient in pill form taken at home would be a Part D drug. Your out-of-pocket cost can differ dramatically depending on which route of administration your doctor prescribes, and the decision is often driven by biology, not economics. For Part B drugs, you typically pay the standard 20 percent coinsurance, which on expensive biologics can translate to thousands of dollars per treatment.
If you are enrolled in a Medicare Advantage plan rather than Original Medicare, the picture gets more complicated. Research has found that among the costliest physician-administered drugs covered under Part B, many are subject to prior authorization requirements in Medicare Advantage plans, and some face step therapy requirements where you must try a less expensive drug first.4PubMed Central. Medicare Advantage coverage restrictions for the costliest physician-administered drugs Original Medicare does not impose prior authorization on Part B drugs in the same way, so switching between Original Medicare and Medicare Advantage can affect your access to specific medications.
What Neither Part A nor Part B Covers
The gaps in Original Medicare are significant enough that they drive entire industries. The biggest ones to know about:
- Long-term custodial care: If you need help with daily activities like bathing, dressing, and eating but do not require skilled medical care, Medicare does not cover it. This is the kind of care most people think of when they picture a nursing home, and it is not a Medicare benefit. Long-term care insurance or Medicaid (for those who qualify financially) are the typical funding sources.
- Dental, vision, and hearing: Original Medicare does not cover routine dental care, eye exams for glasses, or hearing aids. There are narrow exceptions, such as dental work required before certain medical procedures, but routine care is excluded. Many Medicare Advantage plans add these benefits, which is one of their main selling points.
- Care outside the United States: With very limited exceptions, Medicare does not cover health care received abroad. Some Medigap plans offer limited foreign travel emergency coverage, but it is modest.
- Cosmetic surgery: Procedures performed solely for cosmetic reasons are not covered, though reconstructive surgery after an injury or illness may be.
The dental, vision, and hearing gap is probably the most impactful for everyday life. Dental problems in older adults can lead to serious health complications, and hearing loss is linked to cognitive decline and social isolation. Congress has debated adding these benefits to Medicare for years, but as of now they remain excluded from Parts A and B.
How Medicare Advantage Changes the Coverage Picture
Medicare Advantage (Part C) is not a separate benefit category like Parts A and B. It is an alternative delivery system. Private insurance companies contract with Medicare to provide all Part A and Part B benefits, and they often add extras like dental, vision, hearing, and gym memberships. Medicare Advantage plans must cover everything Original Medicare covers, but they can use tools like provider networks, prior authorization, and referral requirements to manage how that care is delivered.
A large matched study comparing roughly 4.4 million Medicare Advantage beneficiaries to the same number of traditional Medicare beneficiaries found that those in Medicare Advantage used fewer discretionary procedures overall.5JAMA Network Open. Health Care Utilization and Equity in Medicare Advantage Compared With Traditional Medicare For example, there were about 2.5 fewer knee replacements per 1,000 White beneficiaries in Medicare Advantage compared to traditional Medicare. Whether lower utilization reflects appropriate gatekeeping or inappropriate barriers to care is one of the most debated questions in Medicare policy. The gap varied by race, with the difference in knee replacement rates being smaller for Black and Hispanic beneficiaries than for White beneficiaries.
From a practical standpoint, if you are choosing between Original Medicare and Medicare Advantage, the coverage categories (Part A services, Part B services) are technically the same. The differences show up in how you access that coverage: network restrictions, prior authorization hurdles, out-of-pocket maximums (which Medicare Advantage plans must include but Original Medicare does not), and the extra benefits like dental and vision that sweeten the deal. For people who want the freedom to see any doctor who accepts Medicare without preapproval, Original Medicare with a Medigap supplement tends to be the choice. For people who want lower premiums and bundled extras and are willing to stay in a network, Medicare Advantage can work well.
Observation Status and the Coverage Gray Zone
One of the most financially dangerous gray zones in Medicare involves hospital observation status, which was mentioned briefly above but deserves its own discussion because of how often it catches people off guard. When you go to the emergency room and are kept in the hospital, you might assume you have been admitted as an inpatient. But hospitals frequently place patients on observation status instead, which is technically an outpatient service billed under Part B.
The consequences ripple outward. Under observation status, your hospital care is billed as outpatient, meaning Part B’s cost-sharing rules apply rather than Part A’s. You pay Part B coinsurance for each service rendered rather than the inpatient deductible. Medications given during observation may not be covered the same way and can sometimes be billed at full retail price. And critically, time spent under observation does not count toward the three-day inpatient stay required to qualify for skilled nursing facility coverage under Part A. Someone who spends four days in the hospital under observation and then needs rehabilitation in a skilled nursing facility could face the entire nursing facility bill with no Medicare help.
Hospitals are required to give you a notice if you have been under observation for more than 24 hours, but by that point the financial damage may already be unfolding. There is no easy fix for this problem at the individual level, though advocacy groups have pushed for legislative changes. The practical advice is straightforward: if you are in the hospital and anyone mentions observation status, ask questions immediately. Ask whether your status can be changed to inpatient, and if not, ask what the financial implications will be for any post-hospital care you might need.
Home Health Care and Where Parts A and B Overlap
Home health care is one area where Parts A and B share coverage in a way that can be confusing. If you need intermittent skilled nursing care or physical, occupational, or speech therapy at home, and you are homebound, Medicare covers home health services. The coverage can come through Part A if it follows a qualifying hospital or skilled nursing facility stay, or through Part B if it does not. In either case, you pay nothing for the home health services themselves, though you do pay 20 percent coinsurance for durable medical equipment supplied through the home health agency.
The catch is that “homebound” has a specific meaning. You do not have to be bedridden, but leaving your home must require considerable effort or the help of another person or a medical device. If you can drive yourself to a doctor’s appointment without difficulty, you likely do not meet the homebound definition. And “intermittent” means the care is needed on a part-time basis, not around the clock. If you need full-time skilled care at home, Medicare’s home health benefit will not cover it.
Home health care also does not include homemaker services like cooking and cleaning unless they are incidental to the skilled care being provided. If what you mainly need is someone to help around the house or assist with personal care, that falls into the custodial care category that Medicare does not cover.
How Cost-Sharing Differs Between Part A and Part B
The cost structures of Part A and Part B are built on completely different logic, which can make budgeting for health care feel unpredictable. Part A uses a benefit-period system. A benefit period starts when you are admitted to a hospital and ends when you have been out of a hospital or skilled nursing facility for 60 consecutive days. Within each benefit period, you pay a single inpatient deductible, which in recent years has been over $1,600. For hospital stays longer than 60 days, daily coinsurance charges begin, and after 90 days you start drawing on a limited pool of lifetime reserve days. Most hospital stays are much shorter than this, so many people only ever encounter the initial deductible.
Part B, by contrast, works more like traditional insurance. You pay an annual deductible (a few hundred dollars), and then Medicare covers 80 percent of the approved amount for most services. You owe the remaining 20 percent with no annual or lifetime cap. This uncapped coinsurance is why a single expensive Part B service, like an outpatient surgery or a series of chemotherapy infusions, can generate enormous bills. Medigap plans exist largely to cover this gap, and their most popular tiers pick up the Part B coinsurance in full.
Understanding these structures matters when you are deciding whether to add supplemental coverage. If you rarely use medical services, the 20 percent coinsurance under Part B may feel manageable. But one serious illness or injury can change the math overnight, and unlike Medicare Advantage plans, Original Medicare has no out-of-pocket maximum to protect you from catastrophic costs.