Key Takeaways

• Medicare is not a single plan but a collection of distinct parts, each with specific functions and coverage rules.

• Understanding what Medicare doesn’t cover is just as important as knowing what it does, especially when it comes to out-of-pocket costs.

Understanding the Core of Medicare in 2025

Medicare is the federal health insurance program primarily for people aged 65 and older, as well as certain younger individuals with disabilities or qualifying medical conditions. As of 2025, more than 65 million people rely on it. While the structure may appear straightforward—Parts A, B, C, and D—the reality of what each part actually covers can be confusing without clarity.

Let’s break down what each Medicare part truly offers in practice—not just on paper—and where major gaps may still leave you exposed.

Medicare Part A: Hospital Insurance

Part A is often called hospital insurance. It generally covers:

• Inpatient hospital stays

• Skilled nursing facility care (after a qualifying hospital stay)

• Hospice care

• Limited home health care services

What Part A Really Means for You

You’re automatically eligible for Part A at age 65 if you’ve paid Medicare taxes for at least 10 years (40 quarters). For most people, there’s no monthly premium.

However, Part A doesn’t mean you’ll leave the hospital with no bill. In 2025:

• The inpatient deductible is $1,676 per benefit period, not per year.

• Daily coinsurance applies after 60 days in the hospital.

• Skilled nursing care is only covered after a hospital stay of three consecutive days, and coverage ends after 100 days.

Many people assume these services are limitless, but they’re time-limited and condition-specific.

Medicare Part B: Medical Insurance

Part B covers outpatient care and services such as:

• Doctor visits

• Preventive screenings

• Lab tests and X-rays

• Outpatient surgeries

• Durable medical equipment

The Practical Reality of Part B

As of 2025:

• The standard monthly premium is $185.

• The annual deductible is $257.

• After the deductible, Medicare covers 80%, and you pay 20% of approved costs.

This 20% coinsurance has no cap, which can lead to significant out-of-pocket spending, especially for ongoing treatment like chemotherapy or dialysis.

You must actively enroll in Part B unless you’re automatically signed up. Delaying enrollment without other creditable coverage could mean lifetime penalties.

Medicare Part C: Medicare Advantage (A Different Route)

Part C is also known as Medicare Advantage. These are plans offered by private companies that contract with Medicare to provide Part A and B benefits.

What You’re Really Getting with Part C

Medicare Advantage plans must cover the same services as Parts A and B but may include:

• Additional benefits like dental, vision, or hearing

• Prescription drug coverage

• Out-of-pocket limits (unlike Original Medicare)

However, there are trade-offs:

• You often have to use a provider network.

• Referrals may be required for specialists.

• Plan benefits, costs, and rules can change every year.

You must already be enrolled in both Parts A and B to join a Part C plan. While it may offer convenience, it’s essential to scrutinize each plan’s limitations.

Medicare Part D: Prescription Drug Coverage

Part D helps cover the cost of prescription medications. It’s offered through standalone plans or included in some Medicare Advantage plans.

How Part D Works in 2025

Part D plans follow a standard benefit structure:

• A deductible phase: up to $590 annually

• Initial coverage where you and the plan share drug costs

• Once you hit $2,000 in out-of-pocket costs, the plan covers 100% of approved drug expenses for the rest of the year (due to the 2025 drug cap)

This cap eliminates the older coverage gap known as the “donut hole,” which previously left many beneficiaries paying large amounts for drugs mid-year.

Still, not all drugs are covered. Each plan uses a formulary—a list of covered medications—which can vary widely.

What Medicare Doesn’t Cover

This is where things get tricky. Medicare Parts A through D leave several common needs uncovered, such as:

• Long-term care (custodial nursing home care)

• Most dental work

• Routine eye exams and eyeglasses

• Hearing aids and exams

• Cosmetic surgery

• Care received outside the United States (with rare exceptions)

Even preventive care isn’t always fully covered depending on the service and frequency.

Because of these gaps, many beneficiaries choose to supplement their Medicare coverage.

Supplemental Coverage: Filling in the Gaps

There are two primary ways to get help with Medicare’s out-of-pocket costs:

Medigap (Medicare Supplement Insurance)

These plans work with Original Medicare (Parts A and B). They help pay for:

• Coinsurance

• Deductibles

• Foreign travel emergency care

Medigap plans don’t include drug coverage, so you’d need a separate Part D plan. Also, enrollment rules can be strict—especially if you try to switch from a Medicare Advantage plan back to Original Medicare later on.

Employer or Retiree Plans

Some people maintain coverage through an employer or union plan that coordinates with Medicare. These can vary widely in quality and cost.

Others may qualify for programs such as:

• Medicaid (for those with limited income and resources)

• Medicare Savings Programs

• Extra Help (for prescription costs)

Enrollment Periods You Can’t Afford to Miss

Understanding Medicare’s parts isn’t enough—you also need to know when to enroll. The wrong timing could result in penalties or gaps in coverage.

Key Enrollment Windows in 2025

• Initial Enrollment Period (IEP): Starts 3 months before your 65th birthday, includes your birthday month, and ends 3 months after. You should enroll in Part A and B during this time unless you have other creditable coverage.

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

• Annual Enrollment Period (AEP): October 15 to December 7 to switch or add Medicare Advantage or Part D coverage. Changes take effect January 1.

• Medicare Advantage Open Enrollment Period (MA OEP): January 1 to March 31. Allows one switch from one MA plan to another or back to Original Medicare.

• Special Enrollment Periods (SEP): Available after certain life events, like losing job-based insurance or moving out of a plan’s service area.

What to Watch Out for in 2025

While Medicare continues to evolve, so do the potential pitfalls. In 2025, here’s what to keep an eye on:

• Inflation-related cost increases: Premiums and deductibles may rise annually.

• Plan benefit changes: Especially with Medicare Advantage, benefits can shift every year.

• Drug formularies: Your medication could be dropped or repriced even within the same Part D plan.

• Enrollment delays: Missing a deadline can cost you more for the rest of your life.

Always read your Annual Notice of Change (ANOC) and review your coverage during the Annual Enrollment Period.

Choosing the Right Combination of Medicare Parts

The best Medicare setup for you depends on several personal factors:

• Do you travel frequently? Original Medicare with a Medigap plan might provide more flexibility.

• Do you prefer coordinated care in one plan? Medicare Advantage may be appealing.

• Are you taking multiple prescriptions? A strong Part D plan is essential.

There’s no universal answer. What matters is how each Medicare part interacts with your specific health needs, lifestyle, and budget.

Why Understanding What’s Missing Matters Most

Medicare offers a strong foundation, but it’s not all-encompassing. The most common surprise people face isn’t what Medicare includes—it’s what it leaves out. You could find yourself on the hook for thousands in long-term care, dental work, or uncovered prescriptions if you assume coverage without verifying.

That’s why taking the time to learn what each part does—and doesn’t do—is one of the most financially critical steps you can take at age 65.

Talk to Someone Who Can Help

Understanding Medicare’s parts is only the first step. Choosing the right plan—or the right combination—requires a close look at your personal situation. A licensed agent listed on this website can walk you through your options, explain what each part means in real life, and help you avoid costly missteps.