Medicare 101: the four parts, in plain English

Medicare is health insurance run by the federal government, mostly for people 65 and over. It is built out of four pieces that were added at different times, which is why the naming makes no sense. Here they are.

Part A — hospital

This covers you when you're admitted to a hospital, plus skilled nursing care after a hospital stay, hospice, and some home health care.

Most people pay no monthly premium for Part A. If you or your spouse worked and paid Medicare taxes for about ten years, you've already paid for it through payroll deductions. That's why almost everyone signs up for Part A at 65 even if they're still working.

It isn't free to use, though. There's a deductible each time you're admitted, and after a long stay you start paying a daily amount.

Part B — doctors and everything outpatient

This covers doctor visits, tests, scans, outpatient surgery, ambulances, and durable medical equipment like a walker or oxygen. Roughly speaking: if you weren't admitted overnight, it's Part B.

Part B has a monthly premium that most people have deducted from their Social Security check. There's an annual deductible, and after that Medicare generally pays 80% and you pay 20% — with no cap on that 20%.

Part C — Medicare Advantage

Part C isn't extra coverage. It's a different delivery method.

A Medicare Advantage plan is offered by a private insurance company approved by Medicare. You still have Medicare, but the plan takes over paying your claims instead of the government. These plans bundle Part A and Part B together, usually include drug coverage, and often add things Original Medicare never covered.

In exchange, they typically use a network of doctors and hospitals, and may require approval before certain procedures.

The other way to close that gap: a Supplement

Medicare Advantage isn't the only answer to Original Medicare's open-ended 20%. The alternative is a Medicare Supplement, also called Medigap — and it's the piece most people have never had explained, largely because it doesn't have a letter of its own.

A supplement doesn't replace Original Medicare. It sits alongside it and pays most of the share you'd otherwise owe. You keep any doctor or hospital that accepts Medicare, with no network and no referrals, and you add a separate Part D plan for prescriptions.

These plans are standardised by law: a Plan G from one company covers exactly what a Plan G from any other company covers. So once you've chosen a letter, you're comparing price and the company's track record — not coverage.

Part D — prescription drugs

Part D covers medications you pick up at a pharmacy. It's sold by private companies too. Each plan has its own list of covered drugs, called a formulary, and the same medication can be treated very differently from one plan to the next.

If you don't take any prescriptions today, it is still usually worth having — see what happens if you sign up late.

So what do you actually choose?

Once you have Part A and Part B — what people call Original Medicare — you're choosing between two broad paths:

• Original Medicare + a Supplement + a Part D plan. Any doctor that accepts Medicare, no network, predictable costs when you need care, and more paid each month whether you use it or not.
• A Medicare Advantage plan. Lower monthly cost, extras Original Medicare never covered, a network to stay inside, and more paid at the point of care up to an annual maximum.

Both are legitimate. They fail in different ways, and which one fits depends on things a chart can't tell you: the doctors you want to keep, the medications you take, whether you travel, and how you feel about paying more each month versus more when something happens.

The two paths walks through the questions that actually decide it.

What to do next

If you're approaching 65, the more urgent thing isn't which path to pick. It's knowing when your window opens and closes, because one of those windows only comes around once.