Why Does Medicare Have So Many Parts, and What Does Each Cover?
Key takeaways:
Medicare began with just Part A (hospital insurance) and Part B (medical insurance).
Medicare now features four major parts: Parts A and B (original Medicare) and optional add-ons Part C (Medicare Advantage, an alternative that bundles the parts together) and Part D (prescription drug coverage).
Medigap is the nickname for Medicare supplement insurance, which covers out-of-pocket costs for Medicare Parts A and B. There are 10 nationally standardized Medigap plans, and some share alphabetical names with the major Medicare parts.
If you had to name Medicare’s parts and plans, rattling off the first half of the alphabet would be a safe bet. From the common parts that cover all enrollees to the supplemental policies that some people choose to lower their out-of-pocket costs, Medicare contains multitudes.
But with a little practice and some visual aid, you can master the Medicare maze — or at least gain a better understanding of how the parts and plans work together to cover your needed healthcare.
Below, we break down Medicare’s various names and parts, describe what they cover, and provide tips on how to keep them straight.
How Medicare got so many parts
When Medicare became law in 1965, it also started at the beginning of the alphabet with Parts A and B. Part A covered hospital and associated services, and Part B was insurance for doctor visits and outpatient services. Simple enough. But as the program grew, so did the number of parts — and letters — associated with it.
Over the years, Parts C and D joined the family like a pair of welcome but complicated relatives. Part C first joined in the 1980s as a way to give Medicare enrollees more choice and to apply cost-saving lessons from private health insurance. Indeed, Part C used to be called Medicare+Choice. It’s now better known as Medicare Advantage (MA) — the optional, all-in-one Medicare alternative sold by Medicare-approved private companies.
MA plans package Medicare Parts A and B and, in most cases, a prescription drug benefit together in one private plan — often for a monthly cost of no more than the Part B premium. Medicare Advantage plans with or without an extra premium average $21 a month. There are 6 types of Medicare Advantage plans, and they comprise their own alphabet soup of names. Health maintenance organization (HMO) and preferred provider organization (PPO) plans are the most common types. But enrollment in special needs plans (SNPs) — for enrollees with low income or who have chronic medical conditions and need coordinated care — is growing.
Medicare Part D is one of the only names that corresponds with its function, as D happens to stand for prescription drug benefit. Part D is among the newer additions to the Medicare mix, with private drug plans first rolling out in 2006.
Here’s a shortcut to remembering Medicare’s major components: The two biggies are Parts A and B. The twin parts make up original Medicare, the government-run pillars that hold up the rest of the program. Hospital insurance (Part A) and medical insurance (Part B) were first on the scene when Medicare started. Lawmakers struggled for years after that to add lasting prescription drug coverage.
Part D arrived in the last 20 years. As a part instead of a plan, it’s a large program that the federal government oversees. Medicare then contracts with insurance companies it approves to sell Part D private drug plans to enrollees who don’t have “creditable” drug coverage from another source, such as an employer-based or retiree plan.
Both parts and plans can and often do change their cost-sharing features every year. For example, Medicare Parts A and B premiums and deductibles typically rise each January. Enrollees with Medicare Advantage and/or Part D plans also should check their costs and coverage for changes before Medicare open enrollment every year.
Medicare Parts vs. Plans
Medicare parts
Large programs within Medicare that the government oversees and sets guidelines for (Parts A, B, C, and D).
Medicare plans
Private insurance plans that Medicare approves and contracts with to deliver care (such as a UnitedHealthcare Medicare Advantage plan or a Humana Part D plan).
Medigap plans
A set of 10 federally standardized private insurance policies that provide additional coverage for Medicare Parts A and B out-of-pocket costs, plus a few state-standardized exceptions in Massachusetts, Minnesota, and Wisconsin. Medigap plans are not available to enrollees who choose Medicare Advantage (Part C).
Why are some of Medigap’s plan names identical to Medicare’s parts?
The other Medicare program name that aptly describes its function is Medigap, also known as Medicare supplement insurance. It fills in the gaps, taking care of deductibles and copayments for enrollees who have original Medicare (Parts A and B).
Medigap plans aren’t the same as Medicare’s four major parts (A, B, C, and D). But the 10 federally standardized Medigap plans, first introduced in 1992, make up an alphabet soup of redundancy and potential confusion: A, B, C, D, F, G, K, L, M, and N.
That means, in most states, you can buy Medigap Plan A or B to protect you from out-of-pocket costs from Medicare Parts A and B. Of course, you can also buy a Medigap Plan G in many states to shield you from Medicare Parts A and B costs — and so on.
But you can no longer buy Medigap Plans E, H, I, or J. If you already have any of those four plans, you can keep them, but they have been closed to new buyers since 2010. As some Medigap plans are restricted, typically by new laws, insurance agents may encourage existing enrollees to switch to newly created plans. These new plans may be more affordable — and often come with letter names from further down the alphabet.
For example, Medigap Plan I can look like the number one when separated from its alphabetical peers, but that didn’t stop Medicare from continuing down its traditional naming path. Even as technology giant Apple drew attention for naming its computer operating systems after big cats such as the cheetah, puma, and panther, Medicare never strayed from its formula. In 2005, when Medigap rolled out two new standardized plans, they were named K and L.
Government programs rarely take their cues from flashy tech or car companies. But imagine if the naming culture of private enterprise had influenced Medicare supplement insurance so you’d now have a choice of a Medigap Tiger or Jaguar plan instead.
If you live in one of the three “waiver states” — Massachusetts, Minnesota, or Wisconsin — your Medigap plans don’t have the same letter names as the other 47 states. That’s because your state began tooling with its own standardized plans before the federal government did. The three states use names like basic, extended basic, supplement 1A, and core plan instead of the regular ABCs.
Health insurance plan names got a splash of color when the government’s Affordable Care Act (ACA) marketplace plans rolled out in 2014. The metal categories, as they are known, began color coordinating benefit and cost levels:
Platinum
Gold
Silver
Bronze
What is the difference between Parts B and D?
Medicare Part B covers the care you get outside the hospital. It also covers some drugs and vaccines that Part D doesn’t cover, such as:
Injectable and infused drugs
Flu vaccine
Pneumococcal vaccine
Most drugs for outpatient or at-home dialysis
Medicare Part D covers prescription medications you get at a pharmacy or other outpatient location that isn’t a hospital or inpatient treatment center. With Part D, you can buy a stand-alone prescription drug plan from a private company or get coverage through a Medicare Advantage plan if you don’t have “creditable” drug coverage from another source, such as a former employer or union. If you put off getting creditable drug coverage for too long, you could face a late enrollment penalty that lasts for as long as you have Medicare.
If you’re Medicare-eligible or take care of someone who is, you can contact the State Health Insurance Assistance Program, or SHIP, with questions on anything Medicare related. Its trained benefits counselors offer unbiased guidance for free.
Medicare Parts and Coverage Basics
Part A
Hospital insurance (inpatient)
Mental health hospital stay
Skilled nursing facility after a hospital stay
Hospice care
Home healthcare
Part B
Doctor and healthcare provider visits (outpatient)
Injectable and infused drugs (the kind you can’t get at a pharmacy)
Vaccines for flu, pneumonia, and hepatitis B
Medical equipment like walkers and wheelchairs
Part C
Medicare Advantage (optional)
Private insurance alternative to traditional Medicare that bundles parts together, often with added benefits such as vision, hearing, and dental care
Part D
Outpatient prescription drug coverage (optional, but a financial penalty accrues if you don’t have what Medicare considers “creditable” coverage from another source)
The bottom line
Medicare can be a confusing alphabet soup of redundant names, parts, and plans. But if you start at the beginning, with Parts A and B, and remember that Part D is for drug coverage, you stand a good chance of remembering the basics.
One tip is that parts represent overarching programs, while plans tend to signify individual health or drug plans offered by private insurance companies that contract with Medicare. When in doubt, you can alway visit Medicare.gov or call a SHIP counselor for help navigating Medicare.
