2026-04-04 · health, medicare, guide

Medicare Basics: Parts, Costs, and Enrollment

Key Takeaways

• Medicare is federal health insurance primarily for people aged 65 and older, though some younger individuals with disabilities or specific conditions also qualify.
• Original Medicare includes Part A (hospital insurance) and Part B (medical insurance). Part C (Medicare Advantage) bundles both, and Part D covers prescription drugs.
• Most people pay no premium for Part A. The standard Part B premium is approximately $175 to $185 per month (adjusted annually).
• Missing your enrollment window can result in permanent late-enrollment penalties, so knowing when to sign up matters.

Who This Is For

This guide is for adults approaching age 65, caregivers helping parents navigate Medicare, and anyone newly eligible due to a qualifying disability. If you are trying to understand what Medicare covers, what it costs, and when to enroll, this is the right place to start. For a broader look at health insurance options, start with the health insurance hub.

Overview

Medicare is a federal health insurance program run by the Centers for Medicare & Medicaid Services (CMS). It primarily covers people aged 65 and older, but it also covers certain younger people with disabilities and people with End-Stage Renal Disease (ESRD) or amyotrophic lateral sclerosis (ALS).

Medicare is divided into parts, each covering different services. Understanding how these parts work together helps you choose the right combination of coverage for your needs and budget.

Who Qualifies for Medicare

You are generally eligible for Medicare if you meet one of these criteria:

• Age 65 or older and a U.S. citizen or permanent legal resident who has lived in the U.S. for at least five consecutive years.
• Under 65 with a qualifying disability and have received Social Security Disability Insurance (SSDI) benefits for at least 24 months.
• Any age with ESRD (permanent kidney failure requiring dialysis or a transplant).
• Any age with ALS (Lou Gehrig’s disease). Coverage begins the month your SSDI benefits start.

If you or your spouse paid Medicare taxes while working (typically 10 years or 40 quarters), you qualify for premium-free Part A.

Medicare Part A (Hospital Insurance)

Part A covers inpatient care and some facility-based services:

• Inpatient hospital stays, including semi-private rooms, meals, nursing care, and medications administered during the stay.
• Skilled nursing facility care (up to 100 days per benefit period following a qualifying hospital stay).
• Home health care when medically necessary and ordered by a doctor.
• Hospice care for terminally ill patients who choose comfort care over curative treatment.

Part A costs

Most people pay no monthly premium for Part A because they or a spouse paid Medicare taxes for at least 10 years. If you do not qualify for premium-free Part A, the monthly premium can be up to approximately $505 (this amount is adjusted annually).

The Part A hospital deductible is approximately $1,630 per benefit period. After the deductible, you pay $0 for the first 60 days in the hospital, then daily coinsurance amounts apply for longer stays.

Medicare Part B (Medical Insurance)

Part B covers medically necessary outpatient services:

• Doctor visits and outpatient care.
• Preventive services such as annual wellness visits, screenings, flu shots, and certain vaccinations.
• Durable medical equipment like wheelchairs, walkers, and oxygen equipment.
• Lab tests, X-rays, and diagnostic imaging.
• Mental health services, both outpatient therapy and some inpatient psychiatric care.
• Ambulance services when medically necessary.

Part B costs

The standard Part B monthly premium is approximately $175 to $185 (adjusted annually). You pay this premium regardless of whether you use medical services that month.

The annual Part B deductible is approximately $240. After meeting the deductible, you typically pay 20% of the Medicare-approved amount for most services, with no annual out-of-pocket maximum under Original Medicare.

That unlimited cost-sharing exposure is one reason many people add supplemental coverage through Medigap or Medicare Advantage.

Medicare Part C (Medicare Advantage)

Medicare Advantage plans are offered by private insurance companies approved by Medicare. These plans bundle Part A and Part B coverage into a single plan and often include additional benefits.

How Medicare Advantage works

• You must have both Part A and Part B to enroll.
• Most plans include Part D prescription drug coverage.
• Many plans offer extras not covered by Original Medicare, such as dental, vision, hearing, and fitness benefits.
• Plans use provider networks (HMO, PPO, or HMO-POS), so you may need to use in-network doctors and hospitals. If you want to learn more about network types, see the health plan types guide.
• Medicare Advantage plans have an annual out-of-pocket maximum, which Original Medicare does not.

Medicare Advantage costs

You still pay the Part B premium. Some Advantage plans charge an additional monthly premium, while others charge $0 extra. Copays, coinsurance, and deductibles vary by plan. Compare plans carefully using Medicare.gov’s Plan Finder tool.

Medicare Part D (Prescription Drug Coverage)

Part D covers outpatient prescription drugs through private plans approved by Medicare. You can get Part D as a standalone plan (paired with Original Medicare) or as part of a Medicare Advantage plan.

Coverage phases

Part D plans have four cost-sharing phases that apply during each calendar year:

1. Deductible phase. You pay full price for prescriptions until you meet the annual deductible (approximately $545, though some plans have no deductible or a lower one).
2. Initial coverage phase. You pay copays or coinsurance for covered drugs. The plan pays the rest.
3. Coverage gap (the “donut hole”). After combined spending (yours and the plan’s) reaches a set threshold, you enter the coverage gap. Recent legislation has reduced out-of-pocket costs in this phase significantly, and enrollees now pay a reduced share of drug costs.
4. Catastrophic coverage phase. After your out-of-pocket spending reaches the annual limit, you pay little or nothing for covered drugs for the rest of the year.

Each plan has a formulary (list of covered drugs) that determines which medications are covered and at what cost tier. Check that your prescriptions are on a plan’s formulary before enrolling.

Medigap (Medicare Supplement)

Medigap policies are sold by private insurers and help pay for costs that Original Medicare does not cover, such as copayments, coinsurance, and deductibles.

Key facts about Medigap

• Medigap plans are standardized by letter (Plan A, Plan B, Plan C, Plan D, Plan F, Plan G, Plan K, Plan L, Plan M, Plan N). Each letter offers the same benefits regardless of which company sells it, though premiums vary.
• Plan G is the most popular option for new enrollees. Plan F was the most comprehensive but is no longer available to people who became eligible for Medicare after January 1, 2020.
• Medigap does not cover prescription drugs. You need a separate Part D plan.
• Medigap does not work with Medicare Advantage. It only supplements Original Medicare (Parts A and B).
• The best time to buy Medigap is during your Medigap Open Enrollment Period, which starts the month you turn 65 and are enrolled in Part B. During this six-month window, insurers cannot deny you coverage or charge more because of health conditions.

Medicare vs Medicaid

Medicare and Medicaid are separate programs that people often confuse.

Some people qualify for both programs. “Dual-eligible” individuals receive Medicare for primary coverage and Medicaid to help cover premiums, deductibles, and services Medicare does not cover.

When to Enroll

Missing enrollment deadlines can mean gaps in coverage and permanent premium penalties.

Initial Enrollment Period (IEP)

Your IEP is a seven-month window around your 65th birthday: the three months before your birthday month, your birthday month, and three months after. This is the most important enrollment window.

General Enrollment Period (GEP)

If you miss your IEP, you can sign up during the General Enrollment Period, which runs from January 1 through March 31 each year. Coverage starts July 1. A late enrollment penalty may apply.

Special Enrollment Periods (SEPs)

You may qualify for a SEP if you have a life event such as:

• Losing employer or union health coverage.
• Moving out of your plan’s service area.
• Qualifying for Medicaid or Extra Help.

If you have coverage through an employer (or your spouse’s employer) with 20 or more employees, you can delay Part B enrollment without penalty and sign up during a SEP when that coverage ends.

Late enrollment penalties

• Part A: If you must pay a premium for Part A and you delay enrollment, your premium may increase by 10%. This penalty lasts for twice the number of years you could have had Part A but did not.
• Part B: Your premium increases by 10% for each full 12-month period you were eligible but not enrolled. This penalty applies for as long as you have Part B.
• Part D: If you go 63 or more consecutive days without creditable drug coverage, you pay a penalty of approximately 1% of the national base premium for each uncovered month. This penalty is permanent.

These penalties are a strong reason to enroll on time. If you are unsure about your enrollment timeline, the health insurance enrollment guide covers broader enrollment strategies.

How Much Medicare Costs

Here is a summary of key Medicare costs. All figures are approximate and adjusted annually.

IRMAA surcharges

If your modified adjusted gross income exceeds certain thresholds, you pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of your standard Part B and Part D premiums. IRMAA thresholds are based on your tax return from two years prior. For example, individuals with income above approximately $103,000 (or $206,000 for married couples filing jointly) pay higher premiums. The surcharge increases at several income brackets.

For a deeper look at health insurance costs across all coverage types, see the cost guide.

Frequently Asked Questions

Is Medicare free?

Part A is premium-free for most people who paid Medicare taxes for at least 10 years (40 quarters). However, Part B, Part D, and any supplemental coverage all have premiums. You will also pay deductibles, copays, and coinsurance when you use services. Medicare is not completely free for anyone.

Do I have to sign up for Medicare at 65?

Not necessarily. If you have health coverage through your own or a spouse’s current employer (with 20 or more employees), you can delay enrollment in Part B without penalty. Once that coverage ends, you get a Special Enrollment Period to sign up. However, if you do not have qualifying employer coverage, delaying past your Initial Enrollment Period results in permanent late enrollment penalties.

Can I have Medicare and employer insurance at the same time?

Yes. If your employer has 20 or more employees, your employer plan typically pays first and Medicare pays second. If your employer has fewer than 20 employees, Medicare pays first. Talk to your benefits administrator to understand how your coverage coordinates.

What is the donut hole?

The donut hole (coverage gap) is a phase in Part D prescription drug coverage. After your total drug spending (combined between you and your plan) reaches a set threshold, you enter the gap. During this phase, you historically paid a larger share of drug costs. Recent legislation has significantly reduced out-of-pocket costs in the donut hole, and once your spending reaches the catastrophic threshold, your costs drop to little or nothing for the rest of the year.

Practical Next Steps

1. Check your eligibility at Medicare.gov to confirm when your coverage can start.
2. Decide between Original Medicare and Medicare Advantage. Original Medicare offers broad provider choice but no out-of-pocket cap. Medicare Advantage offers bundled benefits and cost caps but requires using network providers.
3. Review drug formularies if you take prescription medications. Make sure your drugs are covered under the Part D plan you are considering.
4. Consider Medigap if you choose Original Medicare. Shopping during your Medigap Open Enrollment Period gives you the best pricing and guaranteed acceptance.
5. Compare plans using Medicare’s Plan Finder at Medicare.gov. For general tips on comparing insurance quotes, see the comparison guide.

Sources and References

• Medicare.gov (official Medicare information from CMS)
• Centers for Medicare & Medicaid Services (CMS)
• Social Security Administration: Medicare Benefits
• Kaiser Family Foundation: Medicare Policy