Medicare is the federal health insurance program for people 65 and older, as well as some younger people with disabilities. Most people have heard of it, but very few understand how it actually works until they need to enroll. There are four parts, and each covers something different. Here is what you need to know.
Who Is Eligible for Medicare?
You are eligible for Medicare if you are 65 or older and either you or your spouse worked and paid Medicare taxes for at least 10 years (40 quarters). You may also qualify if you are under 65 and have a qualifying disability, end-stage renal disease, or ALS.
Most people are automatically enrolled in Medicare Parts A and B when they turn 65 if they are already receiving Social Security benefits. If you are not receiving Social Security yet, you need to sign up manually through the Social Security Administration during your initial enrollment period.
Medicare Part A: Hospital Insurance
Part A covers inpatient hospital stays, skilled nursing facility care following a hospital stay, some home health care, and hospice care. This is the part most people think of as “hospital insurance.”
For most people, Part A is free. If you or your spouse paid Medicare taxes for at least 10 years, you pay no premium. If you paid taxes for fewer years, you pay a monthly premium in 2026 of up to $505 per month.
Even with Part A, you pay a deductible for each benefit period. In 2026, the inpatient deductible is $1,632 per benefit period. A benefit period starts the day you are admitted to a hospital and ends 60 days after you leave. You can have multiple benefit periods in one year, each with its own deductible.
Medicare Part B: Medical Insurance
Part B covers outpatient services: doctor visits, preventive care, lab tests, outpatient surgery, mental health services, physical therapy, and durable medical equipment like wheelchairs.
Part B is not free. In 2026, the standard monthly premium is $185 per month. Higher-income earners pay more through a surcharge called IRMAA (Income-Related Monthly Adjustment Amount). Part B also has an annual deductible of $257 in 2026. After the deductible, Medicare typically covers 80 percent of approved costs and you pay 20 percent with no cap.
Medicare Part C: Medicare Advantage
Medicare Advantage (Part C) is an alternative way to get your Medicare coverage. Instead of using Original Medicare (Parts A and B) directly, you enroll in a private insurance plan approved by Medicare. These plans must cover everything Original Medicare covers, but many also include dental, vision, hearing, and prescription drug coverage.
Medicare Advantage plans often have lower or $0 monthly premiums because the government pays the private insurer to cover you. However, they usually have narrower networks (you must use in-network providers) and may require referrals to see specialists.
You still pay the Part B premium. The Advantage plan premium is in addition to, or sometimes offset against, that cost.
Medicare Advantage is popular because it bundles coverage into one plan and can have low out-of-pocket costs. The trade-off is network restrictions and the fact that the plan can change its terms each year.
Medicare Part D: Prescription Drug Coverage
Part D covers prescription drugs. It is offered through private insurance plans approved by Medicare. If you have Original Medicare (Parts A and B), you need to separately purchase a Part D plan. If you have Medicare Advantage, drug coverage may already be included.
Part D plans vary significantly in which drugs they cover (the formulary), what tier each drug falls in, and how much you pay. Each plan publishes its formulary, and you should check that your specific prescriptions are covered before enrolling.
Part D has a deductible (up to $590 in 2026), then cost-sharing through initial coverage, and a cap on out-of-pocket drug costs. In 2026, the out-of-pocket cap for Part D is $2,000 per year — a significant improvement from previous years.
Medigap (Medicare Supplement Insurance)
Medigap is not one of the four parts of Medicare, but it is an important piece of the puzzle. Medigap plans are private insurance policies that fill in the gaps left by Original Medicare, such as the 20 percent coinsurance under Part B and hospital deductibles.
If you have Original Medicare and a Medigap plan, your coverage can be very comprehensive with predictable costs. The trade-off is a higher monthly premium for the Medigap policy.
Medigap plans are only available with Original Medicare, not with Medicare Advantage.
When to Enroll
Your initial enrollment period is the 7-month window that includes the 3 months before your 65th birthday month, the month you turn 65, and the 3 months after. Enrolling during this window avoids late enrollment penalties.
If you miss your initial enrollment window and do not have creditable coverage through an employer, you face late enrollment penalties. The Part B penalty is 10 percent added to your premium for each full 12-month period you were eligible but did not enroll. This penalty is permanent.
If you are still working at 65 and covered by employer health insurance, you may be able to delay Medicare enrollment without penalty. The rules depend on the size of your employer.
Original Medicare vs Medicare Advantage: How to Choose
Original Medicare with a Medigap policy gives you the widest network and most predictable costs. You can see any doctor in the country who accepts Medicare. Medigap policies cost more monthly but protect you from large unexpected bills.
Medicare Advantage is better suited to people who prefer lower monthly premiums, do not travel frequently for healthcare, and are comfortable staying within a plan network. Many plans include extras like dental and vision that Original Medicare does not cover.
The best choice depends on your health, finances, and how much you value flexibility versus lower premiums.