Medicare is more valuable than ever, with new benefits like a $2,000 out-of-pocket cap on prescription drugs and negotiated prices on high-cost medications. Here's what you need to know about all four parts of Medicare in 2025-2026.
President Lyndon Johnson signed the first Medicare bill into law in July 1965, creating a national health care program for Americans 65 and over. Initially, Medicare only covered hospital and outpatient medical services. Over the past 60 years, coverage has expanded to include more services, prescription drugs, and additional populations.
Today, Medicare is one of the largest health insurance programs in the world. As of September 2024, approximately 68.6 million Americans are enrolled in Medicare—about 19.4% of the U.S. population. In North Carolina, over 2.2 million residents are enrolled in Medicare, with more than 56% of them choosing Medicare Advantage plans.
Medicare has four main components. Medicare Part A and Part B (together called "Original Medicare") cover approximately 80% of most people's medical expenses. However, you can purchase additional policies—like Medicare Advantage (Part C), Medicare Part D, or Medigap—to fill the gaps that Original Medicare doesn't cover.
Medicare Part A is hospital insurance. It covers inpatient care when you need to stay in a facility, including:
Inpatient hospital stays (room, meals, nursing services, medications, and other services)
Skilled nursing facility care (following a qualifying hospital stay)
Hospice care for terminal illness
Home health care (limited)
Part A Costs (2025):
Premium: $0/month for most people (if you or your spouse paid Medicare taxes for at least 10 years/40 quarters). About 99% of Medicare beneficiaries qualify for premium-free Part A.
Hospital deductible: $1,676 per benefit period in 2025 (increasing to $1,736 in 2026)
Days 61-90 coinsurance: $419/day in 2025 ($434/day in 2026)
Lifetime reserve days: $838/day in 2025 ($868/day in 2026)
Skilled nursing coinsurance (days 21-100): $209.50/day in 2025 ($217/day in 2026)
Medicare Part B is medical insurance. It covers outpatient services—care you receive without being admitted to a hospital—including:
Doctor visits and office procedures
Lab work, X-rays, MRIs, and other diagnostic tests
Preventive services (many screenings and vaccines at no cost)
Durable medical equipment (wheelchairs, walkers, oxygen equipment)
Outpatient surgeries and emergency room visits
Some medications are administered in a doctor's office (like chemotherapy infusions)
Part B Costs (2025-2026):
Standard premium: $185.00/month in 2025, increasing to $202.90/month in 2026 (a 9.7% increase)
Annual deductible: $257 in 2025, increasing to $283 in 2026
Coinsurance: 20% of the Medicare-approved amount for most services after you meet the deductible
Income-Related Monthly Adjustment Amount (IRMAA): Higher-income beneficiaries pay more for Part B premiums. In 2026, if your modified adjusted gross income from 2024 exceeds $109,000 (individual) or $218,000 (married filing jointly), you'll pay between $284.10 and $689.90 per month, depending on your income level.
Medicare Part C, commonly known as Medicare Advantage, is an alternative way to receive your Medicare benefits through private insurance companies approved by Medicare. These "all-in-one" plans combine Part A and Part B coverage, and most include Part D prescription drug coverage as well.
Key facts about Medicare Advantage:
Growing popularity: In 2025, more than half (54%) of eligible Medicare beneficiaries—34.1 million people—are enrolled in Medicare Advantage plans. In North Carolina, over 56% of Medicare beneficiaries have chosen Advantage plans.
Extra benefits: Many plans include coverage that Original Medicare doesn't offer, such as dental, vision, hearing, fitness programs, and even some over-the-counter item allowances.
Out-of-pocket maximum: Unlike Original Medicare, Advantage plans are required to cap your annual out-of-pocket spending for covered services.
Network restrictions: Most plans require you to use in-network providers or get referrals for specialists. Check that your doctors are covered before enrolling.
Requirements to enroll:
You must be enrolled in both Part A and Part B
You must live in the plan's service area
You continue paying your Part B premium in addition to any Medicare Advantage plan premium
Costs: Premiums and other costs vary by plan, provider, location, and plan type. In North Carolina, the average 2025 Medicare Advantage premium is $18.81/month (in addition to the Part B premium), but all beneficiaries have access to at least one $0-premium plan. There are currently 175 Medicare Advantage plans available in North Carolina.
Medicare Advantage vs. Original Medicare + Medigap: Medicare Advantage is voluntary—you can choose to remain in Original Medicare and add a Medigap (Medicare Supplement) policy to help cover out-of-pocket costs like deductibles and coinsurance. Popular Medigap options include Plan G and Plan N. You cannot have both Medicare Advantage and Medigap at the same time.
If you live in North Carolina and want to know more about Blue Cross NC Medicare Advantage plans, our dedicated local agents can help.
Medicare Part D provides coverage for retail prescription drugs. Introduced in 2006, it's the newest part of Medicare and one of the most valuable—especially with major improvements from the Inflation Reduction Act that took effect in 2025 and 2026.
Major Part D Improvements (2025-2026):
$2,000 Out-of-Pocket Cap: Starting in 2025, your annual out-of-pocket costs for covered prescription drugs are capped at $2,000 (increasing to $2,100 in 2026). After you reach the cap, you pay $0 for covered drugs the rest of the year. This is the most significant Part D improvement since the program began.
Medicare Prescription Payment Plan: You can spread your out-of-pocket drug costs into equal monthly payments throughout the year, interest-free.
$35 Monthly Insulin Cap: All Part D plans must charge no more than $35/month for covered insulin products, with no deductible applied.
$0 Vaccines: All CDC-recommended vaccines (shingles, RSV, Tdap, etc.) are covered at no cost under Part D.
Medicare-Negotiated Drug Prices (2026): Starting January 1, 2026, the first 10 Medicare-negotiated drug prices take effect, with discounts of 38-79% off list prices for medications including Eliquis, Jardiance, Xarelto, Januvia, and Entresto. CMS estimates these lower prices will save Part D enrollees $1.5 billion in out-of-pocket costs. Another 15 drugs (including Ozempic) will have negotiated prices starting in 2027.
Part D Costs (2025-2026):
Maximum deductible: $590 in 2025, $615 in 2026 (many plans have lower or no deductible)
Premiums: Vary by plan. In North Carolina, there are 16 stand-alone Part D plans for 2025 (12 for 2026), with premiums starting at $ 0 per month.
Out-of-pocket maximum: $2,000 in 2025, $2,100 in 2026
Important: It's essential to review your Part D plan's formulary (drug list) each year to make sure your medications are covered at a reasonable cost. Drug coverage and costs can change from year to year.
Original Medicare (Parts A and B) does not cover everything. Services and items generally not covered include:
Routine dental care: Cleanings, fillings, dentures, and most dental procedures
Routine vision care: Eye exams, glasses, and contact lenses for refractive errors
Hearing aids: Devices and routine hearing exams
Long-term care: Custodial care in a nursing home or at home
Care outside the U.S.: With limited exceptions
Cosmetic surgery: Procedures not medically necessary
Acupuncture: Except for chronic low back pain
Note: Many Medicare Advantage plans include some or all of these additional benefits (dental, vision, hearing) at no extra cost. If these services are important to you, a Medicare Advantage plan may be worth considering.
Initial Enrollment Period: 7-month window around your 65th birthday (3 months before, your birthday month, 3 months after)
Medicare Annual Enrollment Period: October 15 – December 7 each year. Review and change your Medicare Advantage or Part D plans for the following year.
Medicare Advantage Open Enrollment Period: January 1 – March 31 each year. Switch between Medicare Advantage plans or return to Original Medicare.
General Enrollment Period: January 1 – March 31 for those who missed their initial enrollment. Coverage begins July 1.
With so many Medicare options—and important new benefits like the $2,000 prescription drug cap and negotiated drug prices—talking to an experienced Medicare agent can make a real difference. We service all of North Carolina and can help you:
Understand the differences between Original Medicare and Medicare Advantage
Compare plans to find coverage that includes your doctors and medications
Determine if you'll benefit from the new prescription drug savings
Explore Medigap options to fill coverage gaps
Choose the best plan for your health needs and budget