How Medicare Parts A, B, C, and D Actually Work Together—and Where the Confusion Starts

Key Takeaways

• Medicare is made up of multiple parts—A, B, C, and D—that are designed to work together, but the way they interact often creates confusion.

• Understanding which parts are mandatory, which are optional, and how they coordinate with one another is crucial for making the right health coverage decisions in 2025.

Understanding the Core Parts: A and B

Medicare begins with what’s known as Original Medicare. This includes Part A and Part B. These two parts serve as the foundation for everything else.

What Part A Covers

Part A is hospital insurance. It helps pay for:

• Inpatient hospital stays

• Skilled nursing facility care (under certain conditions)

• Hospice care

• Some home health care

In 2025, most people don’t pay a monthly premium for Part A if they or their spouse worked and paid Medicare taxes for at least 40 quarters (10 years). If you paid Medicare taxes for fewer than 30 quarters, the monthly premium is $518. For those with 30-39 quarters, it is $284.

There is also a deductible for each benefit period, which has increased to $1,676 in 2025. Additional coinsurance may apply based on the number of days you stay in a facility.

What Part B Covers

Part B is medical insurance. It helps cover:

• Doctor visits

• Outpatient services

• Preventive care

• Durable medical equipment

In 2025, the standard Part B monthly premium is $185. The annual deductible is $257. After meeting the deductible, you typically pay 20% of the Medicare-approved amount for services.

Adding Part D: Prescription Drug Coverage

Part D is Medicare’s prescription drug benefit. It is offered through private plans approved by Medicare and helps cover the cost of prescription medications.

Part D is optional, but if you delay enrolling and don’t have other creditable drug coverage, you could face a late enrollment penalty. This penalty gets added to your Part D premium and remains as long as you have coverage.

As of 2025, a major improvement has been introduced: there’s now a $2,000 annual cap on out-of-pocket drug costs under Part D. Once you hit this limit, your plan covers 100% of your covered medications for the rest of the year.

There’s also the Medicare Prescription Payment Plan, which allows you to spread your out-of-pocket drug expenses over 12 months instead of paying all at once.

Exploring Part C: Medicare Advantage

Part C, also called Medicare Advantage, is an alternative way to receive your Part A and Part B benefits through private insurance companies approved by Medicare.

These plans are required to offer the same coverage as Original Medicare (Parts A and B), but many also include:

• Part D prescription drug coverage

• Additional benefits like dental, vision, and hearing

• Wellness programs and transportation services

Medicare Advantage plans are structured differently and often use provider networks, such as HMOs or PPOs. Costs and benefits vary by plan and region. Some have low deductibles and out-of-pocket maximums for medical services.

However, you must be enrolled in both Part A and Part B to join a Medicare Advantage plan. You also continue to pay your Part B premium in most cases.

How the Parts Work Together in Real Life

The challenge starts when you try to figure out how these parts work in coordination. The key lies in how you structure your Medicare coverage.

Option 1: Original Medicare + Part D

You enroll in Part A and Part B, then add a standalone Part D plan to cover prescriptions. This setup allows flexibility—you can see any doctor or specialist that accepts Medicare. However, this option doesn’t include benefits like vision or dental.

Option 2: Medicare Advantage (Part C)

You choose a Medicare Advantage plan that includes Part A, Part B, and often Part D, bundled into one plan. Some of these plans also offer extra benefits not available in Original Medicare.

This can simplify your coverage under one plan, but you’ll likely have to follow a provider network and get referrals for specialists.

You cannot enroll in both a standalone Part D plan and a Medicare Advantage plan that already includes drug coverage.

Points Where Confusion Commonly Begins

Medicare’s structure isn’t simple, and several points create confusion, especially for new enrollees or those switching plans.

Enrollment Timelines

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

• General Enrollment Period (GEP): From January 1 to March 31 each year if you missed your IEP.

• Annual Enrollment Period (AEP): From October 15 to December 7 to change or add coverage.

• Special Enrollment Periods (SEPs): Triggered by life events like losing employer coverage.

Missing your window can result in penalties, delayed coverage, or restricted plan options.

Late Enrollment Penalties

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

• Part D Penalty: 1% of the national base premium for each month without creditable drug coverage.

These penalties are permanent and can significantly raise your long-term costs.

Dual Coverage Misunderstandings

Some people mistakenly enroll in both a Medicare Advantage plan and a standalone Part D plan. If your Medicare Advantage plan already includes drug coverage, enrolling in a separate Part D plan will automatically remove you from your Medicare Advantage plan.

Employer Coverage Conflicts

If you’re still working at 65 and have group health coverage, the coordination between your employer plan and Medicare can be tricky. In most cases, your employer coverage is primary if your company has 20 or more employees. If fewer than 20, Medicare is usually primary.

What to Know About Cost Coordination

While Medicare Parts A, B, C, and D all serve different roles, you still have to think about how they work together financially.

Out-of-Pocket Maximums

• Original Medicare has no out-of-pocket maximum. You’re responsible for 20% of costs indefinitely unless you have supplemental coverage.

• Medicare Advantage plans are required to include an annual maximum on out-of-pocket costs for Part A and B services, which can provide financial protection.

Supplemental Coverage Options

Some people choose to purchase a Medigap policy with Original Medicare. Medigap plans help pay for costs not covered by Parts A and B, like deductibles and coinsurance. However, you can’t have both Medigap and a Medicare Advantage plan at the same time.

Making the Right Choice in 2025

Your decision on how to combine Medicare Parts A, B, C, and D depends on your health needs, your finances, and how you want to access care.

Here are some general guidelines:

• Choose Original Medicare + Part D if you want flexibility in doctors and don’t mind managing multiple plans.

• Choose Medicare Advantage if you want bundled benefits and are comfortable using a provider network.

• Consider your medications and how well a plan covers them under Part D or a Medicare Advantage plan.

• Review all plan materials during the Annual Enrollment Period each year to make adjustments if needed.

Stay Confident in Your Medicare Decisions

Understanding how Medicare Parts A, B, C, and D work together helps you avoid common mistakes and unnecessary costs. It can be complex, but you don’t have to figure it all out on your own.

For help structuring your Medicare coverage or reviewing your current setup, reach out to a licensed agent listed on this website for professional guidance.