Learn About Medicare Coverage Options Information

Understanding the Four Main Medicare Coverage Plans

Medicare offers four basic types of coverage, and understanding how they work helps you learn what services and costs to expect. These plans differ in how they work with doctors, hospitals, and prescription drug coverage.

Original Medicare, also called Traditional Medicare or Parts A and B, is run directly by the federal government. Part A covers hospital stays, skilled nursing facility care, hospice, and some home health services. Part B covers doctor visits, outpatient services, medical equipment, and preventive care. When you use Original Medicare, you can see any doctor or hospital that accepts Medicare, which means you have broad choices about your care.

Medicare Advantage plans, also called Part C, are offered by private insurance companies that contract with Medicare. These plans must include everything in Parts A and B, but they work differently. Instead of the government paying providers directly, you pay the insurance company a monthly premium, and they manage your benefits. Most Medicare Advantage plans include prescription drug coverage built in, and many offer extra benefits like dental, vision, or fitness programs. However, with Medicare Advantage, you typically must use doctors and hospitals in the plan's network, though some plans allow out-of-network care at higher costs.

Prescription drug coverage comes in two forms. If you have Original Medicare (Parts A and B), you can add a separate Part D plan through a private insurance company to cover medications. If you choose a Medicare Advantage plan, most include drug coverage already, though you may pay different amounts for different medications.

Medigap, also called supplemental insurance, works only with Original Medicare. It's sold by private insurance companies and helps pay costs that Original Medicare doesn't cover, like copayments, coinsurance, and deductibles. Medigap does not include prescription drug coverage, so you would still need a separate Part D plan.

Practical Takeaway: The main choice is between Original Medicare (Parts A, B, and D) with optional Medigap, or Medicare Advantage (Part C). Original Medicare gives you more provider choices but higher out-of-pocket costs. Medicare Advantage typically has lower premiums and may include extra services, but limits your provider network.

How Original Medicare Works and What It Costs

Original Medicare consists of Part A and Part B. Part A is hospital insurance, and Part B is medical insurance. Most people who worked and paid Medicare taxes for at least 10 years do not pay a monthly premium for Part A. Part B requires a monthly premium that changes each year—in 2024, the standard Part B premium is $174.70 per month, though higher earners pay more.

Part A covers inpatient hospital care, including room, meals, and standard hospital services. For a hospital stay, you pay a deductible for each benefit period (the cost in 2024 is $1,556). After you pay the deductible, Medicare covers your full cost for the first 60 days. For days 61–90, you pay a daily copayment (in 2024, this is $389 per day). If you stay longer than 90 days, you enter your "lifetime reserve days," and you pay a higher copayment ($778 per day in 2024) for up to 60 additional days in your lifetime.

Part B covers services outside the hospital, such as doctor visits, lab tests, imaging, and outpatient procedures. After you pay an annual deductible (in 2024, it's $240), you typically pay 20 percent of the approved amount for most services, and Medicare pays 80 percent. Some preventive services, like annual wellness visits and screening tests, are covered at no cost after you pay your Part B deductible. However, Part B does not have an out-of-pocket maximum, meaning you could pay more if you need many services throughout the year.

With Original Medicare, there are no network restrictions. You can see any doctor or hospital that accepts Medicare, which is most providers in the country. This flexibility allows you to choose your own doctors and change them as needed. However, you are responsible for paying your share of costs—deductibles, copayments, and coinsurance—for every service you use.

Original Medicare also does not cover dental, vision, hearing aids, or most long-term care. It covers limited home health services if certain conditions are met, and it covers hospice care for people with terminal illnesses.

Practical Takeaway: Original Medicare gives you freedom to see any Medicare-accepting provider, but you pay premiums, deductibles, and coinsurance for each service. Costs are predictable in some ways (premiums stay the same all year) but can add up if you need a lot of care. Consider adding Medigap or a Medicare Advantage plan to limit out-of-pocket expenses.

Medicare Advantage Plans: Coverage, Network Restrictions, and Extra Benefits

Medicare Advantage plans are private insurance plans that provide all the coverage of Parts A and B and must follow rules set by Medicare. These plans are an alternative to Original Medicare, not an addition to it. If you enroll in a Medicare Advantage plan, you are still in the Medicare program, but a private insurance company administers your benefits.

Most Medicare Advantage plans have lower or even zero monthly premiums compared to the cost of Original Medicare with Medigap. In 2024, many plans across the country have no premium beyond the Part B premium you still pay to Medicare. This lower cost is possible because Medicare pays the insurance company a fixed amount each month to cover your care. The insurance company keeps this money to manage your healthcare and generate profit.

However, the main tradeoff is that Medicare Advantage plans typically use a network model. You must receive care from doctors, hospitals, and specialists in the plan's network to receive the lowest costs. If you see an out-of-network provider, you may pay higher copayments or coinsurance, or the plan may not cover the service at all. Some Medicare Advantage plans are Health Maintenance Organization (HMO) plans, which usually require you to use network providers except in emergencies. Others are Preferred Provider Organization (PPO) plans, which allow some out-of-network care at higher costs. Point-of-Service (POS) plans combine HMO and PPO features.

Most Medicare Advantage plans include prescription drug coverage at no additional charge, which means you do not need to buy a separate Part D plan. The drug coverage varies by plan, so you should review which medications are covered and at what cost. Some plans cover dental, vision, hearing aids, fitness programs, or other services that Original Medicare does not include. In 2024, many plans offer benefits like free gym memberships or coverage for routine dental care.

Medicare Advantage plans must cover emergency services even outside the network, but the costs to you may be higher. Plans also cannot charge more than Original Medicare for certain services. Each year, the plans, doctors, and hospitals in networks may change, so you should review your plan's current network during the annual open enrollment period.

Practical Takeaway: Medicare Advantage offers lower premiums and may include extra benefits, making it attractive if you are willing to use a limited network of doctors. Before enrolling, verify that your current doctors and preferred hospitals are in the plan's network, and review which drugs are covered if you take medications regularly.

Prescription Drug Coverage Under Part D and Plan Selection

Part D is prescription drug coverage offered by private insurance companies contracted with Medicare. If you have Original Medicare (Parts A and B), you must enroll in a Part D plan to have drug coverage. Medicare Advantage plans typically include drug coverage already, so you do not need to buy Part D separately, though you have the choice to do so in rare cases.

Part D plans vary widely in cost and which drugs they cover. Each plan has a formulary, which is a list of medications the plan covers. Generic drugs are usually cheaper than brand-name drugs, and many formularies offer multiple tiers—generics cost less, preferred brand-name drugs cost more, and non-preferred drugs cost even more. Before enrolling, you should look up your current medications in each plan's formulary to understand what you will pay.

Part D has a standard structure with different cost phases. First, you pay a monthly premium, which varies by plan. After that, you pay out-of-pocket costs when you fill prescriptions until you reach your plan's deductible (in 2024, the maximum deductible is $545). Next comes the initial coverage phase, where you pay a copayment or coins