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How Medicare Works

There are four “parts” to Medicare, and it’s important that you know what each part covers so you can make an informed decision about joining a Part D plan.

In addition to the summary about each part below, you can learn even more about Medicare by requesting or downloading Medicare’s booklet, Medicare & You, which is published and updated every calendar year. The booklet is free.

Part A is coverage for inpatient hospital stays and/or care in a skilled nursing facility. In most cases, people do not have to pay for Part A protection.

Part B is medical coverage for services that include doctor visits, outpatient procedures, preventative screenings, and other medical services you receive in an outpatient setting. People do have to pay a monthly premium for Part B protection, and that premium is set by the federal government each year.

Part C is a different way of getting Part A and Part B combined in a Medicare Advantage Plan. These types of plans are offered by various insurance companies under the government’s rules and guidelines. Medicare Advantage plans usually require you to use a network of hospitals, doctors and other providers in order to receive the plans’ maximum coverage. You would also be required to pay co-payments, co-insurance and other expenses.

Part D covers prescription drugs. You are not required to enroll into a Medicare Part D Prescription Drug Plan. However, if you go without creditable prescription drug coverage for 63 or more days in a row, you may have to pay a late-enrollment penalty if you enroll in a Medicare Prescription Drug Plan (PDP). People with Part D must pay a monthly premium for this coverage. 

Each insurance company that offers a Part D plan decides which drugs it will cover (formulary) and what they will cost with the approval of Medicare. Look carefully at the details of each plan before you choose one.

You pay a monthly premium for prescription drug coverage. You still must pay the monthly premiums for Part B if you have it. Depending on how a drug is used, it may be covered by either Medicare Part B (doctor and outpatient health care) or Medicare Part D (prescription drugs). Your doctor may need to provide the plan with more information about how this drug will be used to make sure it's correctly covered by Medicare.

Because each person’s prescription drug needs are unique, Medicare has made the process easier by offering an online Plan Finder tool at You can also call Medicare at 1-800-MEDICARE (1-800-633-4227), 24 hours a day, 7 days a week. TTY users should call 1-877-486-2048.)

You can get assistance from your local State Health Insurance Assistance Program (SHIP). Each SHIP has people trained to help you understand your Medicare benefits and answer questions you may have about your Medicare coverage.