Medicare Part A, which requires no premium contributions by beneficiaries (who have paid into the Medicare system during their working years), covers hospitalization, home health care, and limited nursing home care. Part A also covers hospice care for terminally ill beneficiaries. Beneficiaries pay a deductible for hospital care. They also may be required to pay some cost sharing for extended hospital stays and for skilled nursing home care after the 20th day. There are no deductibles or other cost sharing for home health and hospice care. Because Medicare coverage of skilled nursing home care is limited to 100 days, beneficiaries often need to turn to other sources for payment, including Medicaid and long-term care insurance.

Medicare Part B covers doctors’ visits, durable medical equipment, home health care, lab tests, and some preventive services such as flu shots. Medicare Part B generally pays 80 percent of approved expenses deemed as “covered expenses.” Beneficiaries are responsible for the remaining 20 percent, together with any uncovered expenses and an annual deductible that increases every year. There is no cost sharing for home health and some preventive benefits.

Part B is optional for beneficiaries, who must pay a monthly premium for the coverage. The Part B premium is usually withheld from participants’ Social Security checks. 

Many Medicare participants purchase separate insurance to pay the Part A and B deductibles and co-payments. Such policies, usually called “Medigap” or “Medicare supplemental policies,” are highly regulated and must conform to model policies established by the National Association of Insurance Commissioners.

Medicare Part C establishes the Medicare Advantage Program as a way to deliver Medicare benefits through private health plans. These plans include Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Private Fee for Service Plans (PFFS). While some of these plans may provide benefits not covered by Medicare, such as vision care, they may also limit a beneficiary’s choice of doctor or hospital. Additionally, beneficiaries who enroll in these plans may pay less out of pocket for doctor’s visits, but more for costly services such as home health care or hospital care.