Understanding all your health care options can be challenging, especially when it comes to Medicare. Why? Medicare isn’t just one plan—it’s broken down into different parts, each providing unique types of coverage.

Below, we explain the basics of Medicare Parts A, B, C, and D (as well as Medigap) and the important role they each play. Whether you’re age 65 yourself or helping someone else understand their health care choices, this guide can help you make sense of the various Medicare options.

Original Medicare (Parts A and B)

Together, Medicare Parts A and B are known as original Medicare. These parts cover a broad array of services older adults need to stay healthy:

• Part A (Hospital Insurance): This coverage pays for care received in the hospital. It also pays some of the costs of stays at skilled nursing facilities, or health care at home. Finally, Part A also covers hospice care for people who are terminally ill.
  
  Medicare Part A is funded by the payroll tax (FICA) that is deposited into the Hospital Insurance Trust Fund. Most people don't pay a premium for Part A if they or their spouse paid Medicare taxes while working.
• Part B (Medical Insurance): Medicare Part B pays for physician services, outpatient hospital care, and home health care that Part A does not pay for. It also covers services like diagnostic and laboratory tests, medical equipment (e.g., wheelchairs and hospital beds), mental health care, and preventive services. Most Medicare enrollees pay a monthly premium for Part B, which is $185 in 2025.

Medicare Advantage (Part C)

Medicare Part C, also known as Medicare Advantage, offers the same benefits as original Medicare. But these plans are sold by private health insurance companies. Some Medicare Advantage plans include Part D prescription drug coverage. Many also offer benefits above and beyond what original Medicare provides—such as hearing aid coverage, fitness club membership, flex card benefits, and other extras.

If you enroll in a Medicare Advantage plan, you still pay your monthly Part B premium. You may also pay an additional monthly premium on top of that and, for some services, a deductible and a portion of the cost of services received (coinsurance). Part C premiums vary by plan; the average basic monthly premium is estimated to be about $17/month in 2025.

Part D (prescription drug coverage)

Original Medicare (Parts A and B) covers a wide range of important health care services, but it does not cover prescription medications. Medicare Part D is a separate prescription drug plan available to Medicare enrollees. Like Medicare Advantage, the Part D benefit is sold through private insurers. These plans may be standalone or built into a Medicare Advantage plan.

Most people enrolled in a Part D plan (and not eligible for the Part D Low Income Subsidy) have out-of-pocket costs. These may include:

• Monthly premium (average Part D premium in 2025 is $46.50)
• Annual deductible (maximum $590 in 2025)
• Cost-sharing portion of plan-covered drugs
• Percentage of the cost of drugs during the period after the initial coverage period and before catastrophic coverage begins

With Part D, catastrophic coverage kicks in after you hit $2,000 in out-of-pocket costs for covered drugs. At that point, you pay $0 for covered prescriptions for the rest of the plan year. This cost cap is especially valuable if you take one or more high-cost medications.

Medigap

Medigap, also known as supplemental insurance, is designed to be used alongside Parts A and B to cover out-of-pocket costs for Medicare-covered services. Medigap cannot be used with Medicare Advantage plans.

You’ll likely pay a monthly premium for Medigap in addition to your monthly Part B premium; premiums vary by plan.

Review your Medicare coverage each year

It’s important to understand that even when you choose a Medicare plan(s), you’re never locked in for more than 12 months. Every year, during the Medicare Open Enrollment Period (Oct. 15 – Dec. 7), you have the opportunity to re-evaluate, add, drop, or switch your Medicare health plan.

“It’s smart to check whether your Medicare plan still meets your needs. Plans and costs can change each year—and sometimes your own health requirements change too," said Ryan Ramsey, NCOA Associate Director of Health Coverage and Benefits.

Need help deciding which Medicare coverages are right for you? Consider reaching out to your local State Health Insurance Assistance Program (SHIP) to get free, unbiased help choosing a Medicare plan. To find your SHIP, call toll-free 1-877-839-2675 or visit the SHIP website.