The Three Main Medicare Programs and How They Differ

Medicare has three separate programs, and which one you use depends on when you turned 65 and whether you worked long enough to earn coverage. Medicare Part A covers hospital stays, skilled nursing care, and hospice. Medicare Part B covers doctor visits, outpatient care, and medical equipment. Medicare Part D covers prescription drugs. Most people over 65 get Part A automatically, but you have to sign up for Part B and Part D, and missing the important date costs you money for life.

There is also Medicare Advantage, which is a different way to get your Part A and Part B coverage — through a private insurance company instead of the government directly. Medicare Advantage plans often include prescription drug coverage and extras like dental or vision, but they come with networks, prior authorizations, and different out-of-pocket costs than Original Medicare.

If you are still working at 65 or covered by a spouse's employer plan, you may not need to sign up right away. If you miss the sign-up window without a valid reason, you will pay a permanent penalty on your Part B and Part D premiums — 10 percent more for each year you delayed, for as long as you have Medicare.

Key Takeaways

  • Part A covers hospital and skilled nursing stays; Part B covers doctors and outpatient care; Part D covers prescription drugs — and you must sign up for Part B and Part D by your important date or pay a lifelong penalty.
  • Original Medicare (Part A and B together) lets you see any doctor who accepts Medicare, but you pay a deductible and coinsurance for each service.
  • Medicare Advantage bundles Part A, Part B, and usually Part D into one plan run by a private company, with lower premiums but restricted networks and prior authorization requirements.
  • If you are still working or covered by an employer plan at 65, you may delay Part B without penalty, but you must tell Social Security or Medicare in writing.
  • Your coverage choices affect your costs for the next year, so review your options every fall during the annual enrollment period.

Original Medicare: Part A, Part B, and How They Work Together

Original Medicare is the government-run program most people picture when they think of Medicare. You get a red, white, and blue card with your name on it. Part A is automatic at 65 if you or your spouse paid Medicare taxes for at least 10 years. Part B requires you to sign up, and it costs a monthly premium — the standard amount in 2024 is $164.90, but it is higher if your income was over $103,000 as a single filer two years ago.

With Original Medicare, you can see any doctor, hospital, or specialist in the United States who accepts Medicare — which is most of them. You pay a deductible when you use a service, then coinsurance (usually 20 percent of the cost) after that. There is no network, no prior authorization for most things, and no referral requirement. You are responsible for the full bill if you see a provider who does not accept Medicare, unless they told you in advance and you agreed in writing.

Part A covers up to 100 days in a skilled nursing facility after a hospital stay, but only if you were hospitalized for at least three days first. It does not cover custodial care — help with bathing, dressing, and meals — which is what most people end up needing in a nursing home. Part B covers preventive care like annual wellness visits and cancer screenings at no cost to you, but it does not cover routine dental, vision, or hearing care.

Medicare Advantage: Private Plans That Bundle Coverage

Medicare Advantage is an alternative to Original Medicare. You still get Part A and Part B coverage, but through a private insurance company under contract with Medicare. The company sets the rules: which doctors and hospitals you can use, whether you need a referral to see a specialist, and what you pay out of pocket. Most Medicare Advantage plans include Part D (prescription drug coverage) and add-ons like dental, vision, or hearing — things Original Medicare does not cover.

The trade-off is cost versus choice. Medicare Advantage premiums are often lower than Original Medicare, and out-of-pocket maximums are capped by law. But you are locked into a network, and if you see an out-of-network doctor without authorization, you pay the full bill. Many plans require prior authorization before you can have surgery, imaging, or specialist visits. If you travel outside your plan's service area for more than a few weeks, you may not be covered.

Medicare Advantage plans change every year — the companies that offer them, the networks they use, the drugs they cover, and the costs. You can switch plans during the annual enrollment period (October 15 to December 7) without penalty. If you move to a different state or your plan leaves your area, you get a special enrollment period to switch outside the normal window.

Part D: Prescription Drug Coverage and How to Avoid Penalties

Part D is prescription drug coverage sold by private insurance companies approved by Medicare. You do not have to take it at 65 if you have other drug coverage — through an employer, a union, or a spouse's plan — but if you go without it and later sign up, you pay a penalty of about 1 percent of the national average premium for each month you were uninsured. That penalty stays on your premium for life.

Part D plans vary widely in which drugs they cover, what tier (cost level) each drug is on, and what you pay. A drug that costs $10 on one plan might cost $50 on another. You can switch Part D plans every year during the annual enrollment period, and you should — your health changes, drug prices change, and formularies (the list of covered drugs) change. If your current plan no longer covers a drug you need, you may be able to switch outside the normal window.

Part D has a coverage gap called the "donut hole." Once you and your plan have spent $5,850 on covered drugs in 2024, you enter the gap and pay more out of pocket until your total out-of-pocket spending reaches $7,050. After that, catastrophic coverage kicks in and you pay a small coinsurance. The exact amounts change every year. Some plans offer coverage in the gap, and some drugs are covered differently, so read your plan's details carefully.

When You Are Still Working: Delaying Part B Without Penalty

If you or your spouse are still working at 65 and covered by an employer health plan, you can delay Part B without paying a penalty — but only if you tell Medicare or Social Security in writing. straightforward not signing up is not enough; you must document that you had other coverage. When you finally leave your job or lose the employer coverage, you have eight months to sign up for Part B without penalty. After that, the 10 percent annual penalty applies.

Part A is different. If you have employer coverage, you still do not have to take Part A at 65, but once you turn 65 and are no longer working, you should sign up within three months to avoid penalties. Some people delay Part A if they are still working and have employer coverage, but the rules are stricter than for Part B.

Keep records of your employer coverage — the plan name, the dates you were covered, and proof that it was active. You will need this when you sign up for Part B later. If you miss the important date and cannot prove you had other coverage, you will pay the penalty.

Enrollment Periods: When You Can Sign Up or Switch

Your initial enrollment period is the seven months centered on your 65th birthday — three months before, the month you turn 65, and three months after. If you miss this window, you pay a penalty on Part B and Part D for as long as you have Medicare, unless you had other coverage or may have access to for a special enrollment period.

The annual enrollment period runs from October 15 to December 7 every year. During this time, you can switch from Original Medicare to Medicare Advantage, from Medicare Advantage to Original Medicare, or between Medicare Advantage plans. You can also switch Part D plans. Changes take effect January 1. Outside this window, you can only switch if you have a may have access to life event — you moved, lost employer coverage, or your plan left your area.

If you are on Medicare Advantage and your plan leaves your service area or you move, you get a special enrollment period to switch to a different plan or back to Original Medicare. This period usually lasts two months from the date you receive notice. Do not wait — if you miss it, you are stuck until the next annual enrollment period.

Costs: Premiums, Deductibles, and Out-of-Pocket Limits

Original Medicare has no annual out-of-pocket limit. You pay Part B premiums (standard $164.90 in 2024, higher if your income is above certain thresholds), a Part A deductible ($1,632 in 2024 for each hospital stay), and 20 percent coinsurance after that. For a serious illness or long hospital stay, costs can climb into the thousands. This is why many people buy a Medigap policy — supplemental insurance that covers the deductible and coinsurance.

Medicare Advantage plans have an annual out-of-pocket maximum, capped by law at $8,700 for in-network care in 2024. Once you hit that limit, the plan covers 100 percent of in-network services for the rest of the year. Premiums are often lower than Original Medicare, but you pay more per visit if you use many services. Plans also vary in whether they charge copays (a flat fee per visit) or coinsurance (a percentage of the cost).

Part D premiums vary by plan and income. The standard premium in 2024 is around $34 per month, but plans range from $6 to $100 or more. If your income is over $103,000 as a single filer, you pay an additional income-related premium on top of Part B and Part D. These thresholds are adjusted every year.

Medigap: Supplemental Coverage for Original Medicare

Medigap is supplemental insurance sold by private companies that covers the deductibles, coinsurance, and copays that Original Medicare does not. It is not the same as Medicare Advantage — Medigap works alongside Original Medicare, not instead of it. You still use your Medicare card, see any doctor who accepts Medicare, and pay your Part B premium. Medigap just fills in the gaps.

There are ten standardized Medigap plans, labeled A through N. Plan F and Plan G cover the most, but they cost more. Plan A and Plan B are cheaper but cover less. All plans with the same letter cover the same benefits, regardless of which company sells them — the only difference is price. You can shop around and switch plans, but if you are over 65 and have a pre-existing condition, some companies can deny you or charge more.

The best time to buy Medigap is within six months of turning 65 and signing up for Part B. During this window, companies cannot deny you or charge more based on health. If you wait, you may face medical underwriting. Medigap premiums are separate from Medicare premiums and vary by company, age, and location.

Frequently Asked Questions

Do I have to choose between Original Medicare and Medicare Advantage, or can I switch back and forth?

You can switch during the annual enrollment period (October 15 to December 7) every year. If you move, lose employer coverage, or your plan leaves your area, you get a special enrollment period to switch outside the normal window. Switching takes effect January 1 of the following year.

What happens if I do not sign up for Part B at 65?

You will pay a 10 percent penalty on your Part B premium for each year you delayed, for as long as you have Medicare. The only exception is if you had other coverage through an employer or a spouse's plan — you must tell Medicare or Social Security in writing that you had this coverage.

Can I have both Original Medicare and Medicare Advantage at the same time?

No. You must choose one or the other. If you enroll in Medicare Advantage, your Original Medicare coverage ends. If you switch back to Original Medicare, your Medicare Advantage coverage ends. You can have Medigap (supplemental insurance) alongside Original Medicare, but not alongside Medicare Advantage.

Do I need Part D if I do not take many medications?

If you do not have other drug coverage, you should sign up for Part D even if you do not use it now. If you go without it and later need it, you pay a penalty of about 1 percent of the national average premium for each month you were uninsured. That penalty stays on your premium for life, even if you only take one medication later.

What is the difference between Medicare and Medicaid?

Medicare is federal health insurance for people 65 and older, regardless of income. Medicaid is state-run health insurance for people with low income, regardless of age. Some people may have access to for both — this is called "dual may be able to access." The programs have different rules, different providers, and different coverage.