Medicare is the federal health insurance program for Americans aged 65 and older, as well as certain younger people with disabilities. If you are approaching 65 or helping a parent navigate coverage, understanding what each part covers — and what it costs — can save thousands of dollars per year. This guide breaks down Parts A, B, C, and D in plain language for 2026.
What Is Medicare?
Medicare is administered by the Centers for Medicare and Medicaid Services (CMS). It covers roughly 67 million Americans and is funded through a combination of payroll taxes, premiums, and general federal revenue. Unlike private insurance, Medicare is not a single plan — it is a collection of distinct programs that cover different types of care.
Enrollment is generally automatic if you are already receiving Social Security benefits. Otherwise, you must actively sign up during specific enrollment windows or risk late penalties that can follow you for life.
Medicare Part A: Hospital Insurance
Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. Most people pay no premium for Part A if they or their spouse worked and paid Medicare taxes for at least 10 years (40 quarters).
What Part A Covers in 2026
- Inpatient hospital stays (semi-private room, meals, general nursing, drugs given as part of inpatient treatment)
- Skilled nursing facility care after a qualifying 3-day hospital stay
- Hospice care for terminal illness
- Home health services when medically necessary
Part A Costs in 2026
While most people pay $0 in monthly premiums for Part A, there are deductibles and coinsurance costs to be aware of:
- Deductible per benefit period: $1,676 (2026 figure)
- Days 1-60: $0 coinsurance after deductible
- Days 61-90: $419/day coinsurance
- Lifetime reserve days (days 91+): $838/day
A “benefit period” begins when you are admitted to a hospital or skilled nursing facility and ends when you have been out of inpatient care for 60 consecutive days. You can have multiple benefit periods per year, each with its own deductible.
Medicare Part B: Medical Insurance
Part B covers outpatient care, including doctor visits, preventive services, lab tests, durable medical equipment, and some home health care. Unlike Part A, virtually everyone pays a monthly premium for Part B.
What Part B Covers in 2026
- Doctor visits and specialist consultations
- Outpatient surgery and procedures
- Preventive screenings (mammograms, colonoscopies, diabetes screenings)
- Mental health services
- Ambulance services
- Durable medical equipment (wheelchairs, walkers, CPAP machines)
- Outpatient prescription drugs administered in a clinical setting (chemotherapy, certain injections)
Part B Costs in 2026
- Standard monthly premium: $185.00
- Annual deductible: $257
- Coinsurance: 20% of the Medicare-approved amount after meeting the deductible
Higher earners pay more through Income-Related Monthly Adjustment Amounts (IRMAA). If your modified adjusted gross income from two years ago exceeded $106,000 (individual) or $212,000 (married filing jointly), your premium is higher.
Medicare Part C: Medicare Advantage
Part C, also called Medicare Advantage, is an alternative way to receive your Medicare benefits through a private insurer approved by Medicare. These plans must cover everything Parts A and B cover, and most also include Part D drug coverage plus extra benefits.
What Makes Medicare Advantage Different
Medicare Advantage plans operate as managed care — typically HMO or PPO networks. You often have lower out-of-pocket costs for in-network care, but you may need referrals to see specialists and your coverage is restricted to the plan’s service area.
Extra Benefits Medicare Advantage May Include
- Prescription drug coverage (Part D)
- Routine dental, vision, and hearing
- Fitness memberships
- Transportation to medical appointments
- Over-the-counter drug allowances
What Medicare Advantage Costs in 2026
Many Medicare Advantage plans have $0 monthly premiums in addition to the Part B premium you continue paying. However, they have their own deductibles, copays, and out-of-pocket maximums. The maximum out-of-pocket limit for in-network services in 2026 is $9,350 for most plans.
Should You Choose Original Medicare or Medicare Advantage?
Original Medicare (Parts A and B, possibly with a Medigap supplement) gives you more flexibility to see any provider nationwide. Medicare Advantage often has lower costs but narrower networks. If you travel frequently or have doctors you want to keep, Original Medicare plus a Medigap plan often makes more sense. If you want dental and vision bundled in and stay mostly in-network, Medicare Advantage can be the better deal.
Medicare Part D: Prescription Drug Coverage
Part D adds prescription drug coverage to Original Medicare. It is offered through private insurers and varies widely in cost and which drugs are covered. If you have Medicare Advantage with drug coverage, you already have Part D included.
How Part D Works
Part D plans use a formulary — a list of covered drugs organized into tiers. Tier 1 drugs (generics) have the lowest copays; Tier 5 drugs (specialty biologics) have the highest. Each plan’s formulary is different, so you should run your specific medications through Medicare’s Plan Finder tool before choosing a plan.
Part D Costs in 2026
- Monthly premium: Varies by plan, averaging around $46 nationally
- Annual deductible: Up to $590 (plans may have lower or $0 deductibles)
- Catastrophic coverage: Starting in 2025, a $2,000 annual out-of-pocket cap on covered drugs went into effect — a significant protection for people on expensive medications
The Late Enrollment Penalty for Part D
If you do not enroll in Part D when first eligible and go 63 or more consecutive days without creditable drug coverage, you will pay a permanent late enrollment penalty added to your monthly premium. The penalty is 1% of the national base beneficiary premium for every month you went without coverage.
Medigap: Filling the Gaps in Original Medicare
Original Medicare covers about 80% of approved costs. A Medigap (Medicare Supplement) policy covers some or all of what Medicare does not. Plans are standardized across most states — Plan G, the most popular, covers the Part A deductible, Part B coinsurance, and skilled nursing coinsurance. Premiums vary by plan, insurer, and your location, typically ranging from $80 to $300 per month for a 65-year-old.
Medigap policies do not cover prescription drugs, dental, vision, or hearing, so you would still need a standalone Part D plan.
When to Enroll in Medicare
Your Initial Enrollment Period (IEP) runs for seven months: three months before your 65th birthday month, your birthday month, and three months after. Enrolling during the first three months ensures your coverage starts on the first day of your birthday month.
If you miss your IEP, you can enroll during the General Enrollment Period (January 1 through March 31) but coverage starts July 1 and you may face late penalties.
If you have employer coverage through a job you or your spouse currently holds, you can delay Medicare without penalty and enroll during a Special Enrollment Period when that coverage ends.
Key Takeaways
- Part A covers hospital inpatient care — most people pay no premium
- Part B covers outpatient care — $185/month standard premium in 2026
- Part C (Medicare Advantage) bundles A, B, and usually D through private insurers
- Part D covers prescription drugs — enroll on time to avoid permanent penalties
- A Medigap plan fills cost gaps in Original Medicare but costs extra
- Enroll during your Initial Enrollment Period to avoid late penalties
Medicare is complex but manageable once you understand how the parts fit together. Run your specific medications, doctors, and budget through Medicare’s Plan Finder tool each fall during Open Enrollment (October 15 through December 7) to make sure you have the best-value coverage for the coming year.