Medicare has four main parts, each covering different types of healthcare. Parts A and B make up “Original Medicare,” which is the traditional government-run program. Part C (Medicare Advantage) is a private-plan alternative that bundles everything together. Part D covers prescription drugs. There’s also Medigap, a supplemental insurance option that fills gaps in Original Medicare. Here’s how each one works and what it costs in 2025.
Part A: Hospital Insurance
Part A covers inpatient care. That includes hospital stays, skilled nursing facility care after a qualifying hospital stay, hospice care, and some home health services. Most people pay no monthly premium for Part A because they or a spouse paid Medicare taxes for at least 10 years while working. If you haven’t met that work history requirement, you can still buy into Part A, but you’ll pay a monthly premium.
Even without a premium, Part A isn’t free when you actually use it. You’ll owe a deductible each time you’re admitted to the hospital (called a “benefit period”), and longer stays come with daily coinsurance charges after 60 days. Skilled nursing facility stays are fully covered for the first 20 days, then shift to a daily coinsurance cost through day 100.
Part B: Outpatient and Doctor Services
Part B covers the medical care you receive outside a hospital: doctor visits, outpatient procedures, lab tests, preventive screenings, durable medical equipment like wheelchairs, and mental health services. It does not cover routine dental, vision, or hearing care.
In 2025, the standard Part B premium is $185.00 per month, with an annual deductible of $257. After you meet that deductible, you typically pay 20% of the Medicare-approved amount for most services, with no upper limit on what you could spend out of pocket in a given year. That uncapped 20% is one of the main reasons people add supplemental coverage.
If your income is above a certain threshold, you’ll pay more than the standard premium. Medicare uses your tax return from two years prior to calculate this surcharge, known as IRMAA (Income-Related Monthly Adjustment Amount). The surcharge applies to both Part B and Part D premiums and scales up through several income brackets.
Part C: Medicare Advantage
Medicare Advantage plans are offered by private insurance companies as an alternative to Original Medicare. They must cover everything Parts A and B cover, but they deliver that coverage through a managed plan, usually an HMO or PPO, with their own network of doctors and hospitals. Most Advantage plans also bundle prescription drug coverage, so you don’t need a separate Part D plan.
The biggest draw for many people is that Advantage plans often include benefits Original Medicare doesn’t: routine dental, vision exams, hearing aids, fitness programs, and sometimes even meal delivery after a hospital stay. Many plans also charge $0 in monthly premiums beyond the standard Part B premium you’re already paying.
HMO vs. PPO Plans
The two most common types of Medicare Advantage plans work differently when it comes to choosing your doctors. With an HMO, you generally must use doctors and hospitals within the plan’s network. You’ll pick a primary care provider who coordinates your care and may need referrals to see specialists. If you go outside the network, the plan may not cover the cost at all.
A PPO plan also has a provider network, but it will cover out-of-network care too, just at a higher cost. You can see specialists without a referral, which gives you more flexibility. Both plan types charge copayments for services, and both may have deductibles, though these can be quite low or even $0 depending on the plan.
One important structural difference from Original Medicare: all Advantage plans have an annual out-of-pocket maximum. Once you hit that cap, the plan pays 100% of covered services for the rest of the year. Original Medicare has no such cap, which means a serious illness could result in much higher costs without supplemental coverage.
Part D: Prescription Drug Coverage
Part D plans are sold by private insurers and cover prescription medications. If you’re on Original Medicare, you can add a standalone Part D plan. If you’re on a Medicare Advantage plan that includes drug coverage, you’re already enrolled in Part D through that plan.
Every Part D plan organizes drugs into tiers. Lower tiers contain generic and preferred medications with smaller copays. Higher tiers cover brand-name and specialty drugs at greater cost. The specific drugs covered and what you pay for them vary widely from plan to plan, so it’s worth checking whether your medications are on a plan’s formulary before you enroll.
There’s a financial penalty for waiting too long to sign up. If you go 63 or more consecutive days without Part D or equivalent drug coverage, you’ll pay a late enrollment penalty for as long as you have Medicare drug coverage. The penalty is calculated at 1% of the national base beneficiary premium (which is $38.99 in 2026) multiplied by the number of full months you went without coverage. That amount gets added to your monthly premium permanently, so even a couple of years without coverage can add up.
Medigap: Supplemental Insurance for Original Medicare
Medigap policies are sold by private insurers specifically to fill the cost-sharing gaps in Original Medicare. They can cover your Part A and Part B deductibles, the 20% coinsurance on Part B services, and other out-of-pocket costs. Medigap is only available if you’re enrolled in Original Medicare. You cannot use a Medigap policy with a Medicare Advantage plan.
Medigap plans are standardized by letter (A, B, C, D, F, G, K, L, M, N), and each lettered plan offers the same benefits regardless of which insurance company sells it. The price is the only thing that varies between insurers for the same plan letter.
Plan G vs. Plan N
Plan G and Plan N are the two most popular Medigap options for people newly eligible for Medicare. Plan G covers 100% of Part B coinsurance and 100% of Part B excess charges (the amount a doctor can bill above Medicare’s approved rate). Plan N has a lower premium but doesn’t cover Part B excess charges at all, and it requires small copayments for some office visits and certain emergency room visits. For people who see doctors frequently or live in states where providers can charge above Medicare rates, Plan G’s more complete coverage often justifies the higher premium.
The best time to buy a Medigap policy is during your Medigap Open Enrollment Period, which starts the month you turn 65 and are enrolled in Part B. During this six-month window, insurers must sell you any Medigap plan they offer at the standard price, regardless of your health. After that window closes, insurers in most states can deny coverage or charge more based on pre-existing conditions.
How the Enrollment Periods Work
Your Initial Enrollment Period for Medicare is a seven-month window centered on your 65th birthday: it starts three months before the month you turn 65 and ends three months after. Signing up during the first three months means your coverage begins as soon as possible. Waiting until the later months can delay your start date and, for Part B, trigger a permanent late enrollment penalty of 10% for every 12-month period you were eligible but didn’t enroll.
If you’re still working and covered by an employer plan when you turn 65, you generally have a Special Enrollment Period that lets you sign up without penalty once that employer coverage ends. The Annual Enrollment Period, which runs from October 15 through December 7 each year, is when you can switch between Original Medicare and Medicare Advantage, change Advantage plans, or join, drop, or switch Part D plans. Changes made during this window take effect January 1 of the following year.
Choosing Between Original Medicare and Medicare Advantage
The choice between Original Medicare (with or without Medigap and Part D) and Medicare Advantage comes down to what you value most. Original Medicare lets you see any doctor or hospital in the country that accepts Medicare, with no network restrictions and no referrals needed. Adding a Medigap policy gives you predictable costs but means paying two premiums: one for Part B and one for the supplement. You’ll also need a separate Part D plan for prescriptions.
Medicare Advantage simplifies things into a single plan with one card, often at a lower combined premium. You get the out-of-pocket maximum that Original Medicare lacks, plus extras like dental and vision. The trade-off is a limited provider network and, with HMOs, the need for referrals. If you travel frequently, split time between states, or have doctors spread across different health systems, Original Medicare’s flexibility may matter more. If you’re healthy, cost-conscious, and comfortable staying within a network, Advantage can be a strong fit.
Your medications also factor in. Advantage plans with built-in drug coverage may be convenient, but standalone Part D plans sometimes offer better pricing for specific drugs. Comparing your actual prescriptions against each plan’s formulary is one of the most practical steps you can take before making a decision.