Medicare Plan Types: The Four Parts of Medicare

If you’re new to Medicare, you might be surprised to learn that it is not a single plan. The Medicare health insurance program actually includes multiple plan types. This can be good because it gives enrollees multiple options so that they can choose the right coverage for their health and financial needs. But it can also be confusing.

Don’t worry. We’ve got you covered with a breakdown of Medicare plan types.

The Four Parts of Medicare

Medicare consist of four main parts: Medicare Part A, Medicare Part B, Medicare Part C and Medicare Part D.

• Medicare Part A is your hospital insurance. It helps cover inpatient care in hospitals, skilled nursing care, hospice care and some home health care.
• Medicare Part B is your medical insurance. It helps cover services from doctors and other health care providers, outpatient care, preventative services and durable medical equipment.
• Medicare Part C is commonly called Medicare Advantage. These are plans offered by private insurance companies. Medicare Advantage plans combine the coverage provided under Medicare Parts A and B into one plan. Many Medicare Advantage plans also provide prescription drug coverage and other benefits not normally covered by Medicare. Medicare Advantage plans vary in terms of cost, networks, benefits and other key issues, so it is important to compare your options carefully.
• Medicare Part D is prescription drug coverage. Medicare Part D plans are sold by private insurance companies. Medicare Part D plans can vary in terms of cost and prescriptions covered, so it is important to compare your options carefully and to make sure your prescriptions are adequately covered.

The term Original Medicare, or sometimes traditional Medicare, is often used to refer to Medicare Part A and Medicare Part B combined. Medicare beneficiaries have many options when it comes to coverage, but their main decision is usually whether they want to enroll in Original Medicare or Medicare Advantage.

• If they enroll in Original Medicare, they can enroll in a Medicare Part D plan to cover their prescription drugs. They can also enroll in a Medicare Supplement Insurance policy to help with some of the out-of-pocket costs that Original Medicare leaves.
• If they enroll in Medicare Advantage, they will probably have multiple plans in their area to choose from, and they can select the one that is right for their needs. Most Medicare Advantage plans include prescription drug coverage, but people who enroll in a Medicare Advantage plan without prescription drug coverage can select a Medicare Part D plan to enroll in. People who enroll in Medicare Advantage cannot enroll in a Medicare Supplement Insurance policy.

Medicare Supplement Insurance Policies

Medicare Supplement Insurance policies are often called Medigap policies. They fill in many of the out-of-pocket costs – or gaps – that Original Medicare leaves.

Although beneficiaries have to pay an additional premium to purchase Medigap coverage, doing so can reduce the possible out-of-pocket costs that enrollees may incur. Because Original Medicare does not have an out-of-pocket cap, this is an important option to consider.

There are different types of Medigap policies, and they are standardized regardless of the insurance company that offers them. Most states standardize them in the same way, but policies in Massachusetts, Minnesota and Wisconsin are standardized differently.

Standardized Medigap plans are typically identified by the letters A, B, C, D, F, G, K, L, M and N, and there are important differences between the plans. While these Medigap policies typically provide 100 percent coverage for Medicare Part A coinsurance and hospital costs for up to an additional 365 days after Original Medicare benefits are used, the coverage for other costs varies. However, all Medigap policies can help reduce a beneficiary’s out-of-pocket costs by covering key expenses and/or providing an out-of-pocket cap. Learn more about how to compare Medicare Supplement Plans.

Special Needs Plans

Medicare Advantage plans include three types of Special Needs Plans. These plans cater to specific populations with certain coverage needs, and only people who meet the plan’s enrollment criteria are allowed to join.

• Chronic Condition Special Needs Plans (C-SNPs) serve Medicare beneficiaries with specific chronic conditions, and different plans cater to different chronic conditions, including cancer, diabetes, chronic heart failure, stroke, End-Stage Renal Disease and more.
• Institutional Special Needs Plans (I-SNPs) serve Medicare beneficiaries who live in an institution (such as a nursing home) or require nursing care at home.
• Dual Eligible Special Needs Plans (D-SNPs) serve Medicare beneficiaries who are also eligible for Medicaid.

If you qualify for a Special Needs Plan, you can enroll at any time throughout the year. If you no longer meet the plan’s criteria for joining, you will need to leave the plan, and you will be given an opportunity to enroll in another plan.  

Medicare Advantage Plan Types

There are several different types of Medicare Advantage plans, and they each work slightly differently. In addition to the Special Needs Plans, these are the most common plan types you can enroll in:

• Health Maintenance Organization (HMO) plans require enrollees to get health care services from network hospitals and providers. Some HMOs may allow enrollee to receive out-of-network care, but enrollees will have to pay a higher out-of-network cost for this. Enrollees will likely need to select a primary care doctor and may need a referral to see a specialist.
• Preferred Provider Organization (PPO) plans use a network of hospitals and providers. Enrollees can use out-of-network providers, but they will have to pay a higher out-of-network cost. Enrollees typically do not have to select a primary care doctor or get a referral to see a specialist.
• Private Fee-for-Service (PFFS) plans may not have a network, and enrollees can see any Medicare-approved doctor. If the plan has a network, enrollees may pay a higher out-of-pocket cost to see out-of-network providers. Enrollees typically do not have to select a primary care doctor or get a referral to see a specialist. (It should be noted that Original Medicare is a type of Fee-for-Service program, but it is different from the Private Fee-for-Service Medicare Advantage plans.)

Other Medicare Plan Types

Some Medicare beneficiaries may enroll in other plan types, although these may not be available in all areas or to all beneficiaries.

• Medicare Medical Savings Account (MSA) Plans: Medicare Medical Savings Account (MSA) plans are similar to Health Savings Accounts (HSAs), but they are designed to go with high-deductible Medicare Advantage plans. If you select a Medicare MSA, you will have a high-deductible Medicare Advantage plan and a special savings account. The Medicare MSA deposits funds into a special savings account, and this money can be used to pay for care costs. Medicare MSA plans do not cover prescription drugs, but they may cover other benefits not normally covered by Original Medicare, such as dental and vision care.

• Medicare Cost Plans: Medicare Cost Plans are only available in certain parts of the country, and depending on where you live, you may not be able to join one. If a Medicare Cost Plan is available in your area, you may be able to join if you have Medicare Parts A and B coverage or Medicare Part B coverage only. Medicare Cost Plans may provide prescription drug coverage.

• PACE: Program of All-inclusive Care for the Elderly, or PACE, is a joint Medicare and Medicaid program. PACE is available to people who are 55 or older, live in an area served by a PACE organization and need nursing-home level of care. Enrollees must be able to live safely in the community with the help of PACE services. PACE programs include adult day primary care and other services, and services that are not normally covered may be covered if the health care team decides they are necessary. Care is provided in the home as well as in the community and at PACE centers.