The Four Parts of Medicare Are Supposed to Be Simple—But Here’s Why They’re Not

Key Takeaways

• Medicare is made up of four parts—A, B, C, and D—but the way they interact and the decisions required from you are often anything but straightforward.

• In 2025, understanding enrollment timing, coverage gaps, and coordination between parts is more critical than ever to avoid unexpected costs and missed opportunities.

The Basic Structure—And the First Sign of Confusion

Medicare was designed with four distinct components to help you cover your healthcare needs in retirement. On the surface, this should simplify your choices. But by the time you try to match those parts to your real-world needs, the structure quickly becomes anything but simple.

Here’s the technical breakdown:

• Part A: Covers inpatient hospital care, some skilled nursing, hospice, and limited home health services.

• Part B: Covers outpatient services, doctor visits, labs, preventive care, and durable medical equipment.

• Part C: Also known as Medicare Advantage. These are plans offered through private insurers that bundle Part A and B, often including extra benefits.

• Part D: Provides prescription drug coverage.

Each part has its own rules, costs, enrollment timelines, and limitations—and each interacts differently depending on your health needs, income level, and even where you live.

Part A: Free for Most, But Not for All

You’re often told that Part A is “premium-free.” This is only true if you or your spouse paid Medicare taxes for at least 40 quarters (10 years). If not, you’ll pay a monthly premium—up to $518 in 2025 if you have fewer than 30 quarters of coverage.

Even if you qualify for premium-free Part A, other costs apply:

• Inpatient deductible: $1,676 per benefit period

• Coinsurance: After 60 days, you pay $419/day, and even more after 90 days

Also, Part A doesn’t cover long-term care in nursing homes, which is one of the most misunderstood aspects.

Part B: Monthly Premiums and Unexpected Costs

In 2025, the standard Part B premium is $185 per month, but it can be higher based on your income.

Here’s where it gets tricky:

• Deductible: $257 annually

• Coinsurance: You usually pay 20% of the Medicare-approved amount for most outpatient services, with no cap

This means even with Medicare, there’s no maximum out-of-pocket limit under Original Medicare (Parts A and B), which is a critical gap.

You may assume Medicare covers everything once you’re enrolled, but under Part B, even routine services can leave you with significant bills unless you have additional coverage.

Part C: A Bundled Option That Can Get Complicated

Medicare Advantage plans (Part C) are supposed to simplify things by combining Parts A, B, and sometimes D into one plan. While this bundled approach looks convenient, it can create confusion:

• Network restrictions: Most Part C plans use HMOs or PPOs. That means if your doctor isn’t in-network, you may pay more—or not be covered at all.

• Prior authorization: Many services require approval before you receive care, which can delay treatment.

• Out-of-pocket limits: Part C does have a cap on out-of-pocket costs—up to $9,350 for in-network services in 2025—but the range of costs and benefits can vary widely.

Many people don’t realize they can’t combine a Medigap plan (supplemental coverage) with Part C. Once you go with an Advantage plan, that door closes unless you switch back to Original Medicare.

Part D: Essential Yet Often Misunderstood

Part D offers prescription drug coverage, but it’s often where confusion—and costs—escalate.

• Deductible: Up to $590 in 2025

• Formulary limits: Every plan has its own list of covered drugs. If your medication isn’t on the list, you pay full price.

• Tiers and copays: Medications are divided into tiers, and your cost depends on where your prescription falls.

• Out-of-pocket cap: New in 2025, there’s a $2,000 maximum for drug spending. Once you hit that, your plan covers 100% for the rest of the year.

You must enroll during your Initial Enrollment Period (IEP) or face penalties. Even if you don’t take medication now, skipping enrollment can result in lifetime late fees.

Timing Is Everything—And Often Confusing

Medicare has multiple enrollment periods, each with distinct rules. Missing the right window can lead to penalties or gaps in coverage.

• Initial Enrollment Period (IEP): Starts three months before you turn 65, includes your birthday month, and ends three months after.

• General Enrollment Period (GEP): From January 1 to March 31 each year, for those who missed their IEP. Coverage begins July 1.

• Annual Enrollment Period (AEP): October 15 to December 7. This is when you can switch plans or join a Part D plan.

• Special Enrollment Periods (SEPs): Triggered by events like retirement, moving, or losing employer coverage.

These timelines aren’t flexible. Missing one can lock you out for months, which could mean facing higher costs or being stuck with a plan that doesn’t meet your needs.

Coordination Between Parts Creates More Confusion

Even when you enroll in all the right parts, how they work together isn’t always intuitive.

• If you have Original Medicare (Parts A and B) and want drug coverage, you need to add Part D separately.

• If you enroll in a Medicare Advantage plan (Part C), you often get drug coverage bundled in—but not always.

• If you return to Original Medicare from a Part C plan, you may not be able to get Medigap coverage right away, or at all, depending on state rules.

Each part affects the other in subtle ways. These interactions often lead to overlapping costs, gaps in care, or denied services that could have been covered with a different setup.

The Myth of “Automatic Coverage”

You might assume you’ll be automatically enrolled in all the right parts when you turn 65. In most cases, this only happens if you’re already receiving Social Security benefits.

If you’re not, you’ll have to actively enroll. And choosing incorrectly—or forgetting to enroll in Part B or D—can mean long-term penalties:

• Part B penalty: 10% increase in your monthly premium for each full 12-month period you were eligible but didn’t enroll.

• Part D penalty: 1% per month without creditable coverage, added to your premium permanently.

In 2025, with higher healthcare and drug costs, these penalties can add up quickly.

Medigap: Not a Part, But Still Critical

One of the biggest misunderstandings is that Medigap (also called Medicare Supplement insurance) is part of Medicare. It’s not. But it works with Original Medicare to help pay for things like coinsurance, copayments, and deductibles.

You can only get a Medigap policy if you have Parts A and B—not Part C. Timing matters here, too. Your best opportunity is during your Medigap Open Enrollment Period—the six months after you’re both 65 or older and enrolled in Part B.

Miss this window, and insurers can deny you coverage or charge more based on health status.

What This Means for You in 2025

The four parts of Medicare were meant to offer flexibility. But in reality, they require significant planning. Your decisions have to account for:

• What doctors and hospitals you want to use

• How often you use medical services or prescriptions

• Whether you want predictable costs or broader coverage

• How much you can afford to pay out-of-pocket each year

Even small missteps—like delaying enrollment in Part B, skipping Part D, or misunderstanding what’s included in a Medicare Advantage plan—can result in long-term financial consequences.

How to Avoid Costly Medicare Mistakes

To avoid confusion and unnecessary costs in 2025, take the following steps:

• Start early: Begin learning about your Medicare options at least six months before your 65th birthday.

• Understand each part: Know what Parts A, B, C, and D cover—and what they don’t.

• Evaluate your needs annually: Your health and financial situation may change each year. So should your Medicare plan.

• Compare plan options: Don’t default into a plan. Use official resources or speak with a licensed agent listed on this website to compare choices.

• Pay attention to enrollment periods: Mark your calendar for IEP, AEP, and other important Medicare dates.

Make Sense of Medicare Before It Costs You

Medicare isn’t a one-size-fits-all program. The four parts come with different rules, costs, and coverage limitations that don’t always work in harmony. By taking the time now to understand the details, you can make choices that better fit your health, budget, and lifestyle.

For help reviewing your Medicare plan or comparing coverage options, contact a licensed agent listed on this website for expert advice.