Medicare 101: Parts A, B, C, and D Explained — What's Covered and What It Costs
Quick Answer
Medicare has four parts: Part A (hospital coverage, usually free), Part B (doctor and outpatient coverage, ~$185/month in 2026), Part C (Medicare Advantage — private plan bundling A+B+D), and Part D (prescription drug coverage). Most people enroll at 65. Missing your enrollment window triggers permanent premium penalties. Original Medicare covers about 80% of costs; most retirees add a Medigap supplement or choose Medicare Advantage to cover the rest.
Who Qualifies for Medicare?
- U.S. citizens and permanent residents who have lived in the U.S. for 5+ years
- Age 65+
- Under 65 with certain disabilities (after receiving SSDI for 24 months)
- Any age with ALS or End-Stage Renal Disease (ESRD)
Medicare Part A: Hospital Insurance
What it covers:
- Inpatient hospital stays
- Skilled nursing facility care (after a qualifying hospital stay)
- Hospice care
- Some home health services
What it costs: Most people pay $0 premium for Part A (if you or your spouse worked 40+ quarters paying Medicare taxes — that's 10 years of work). If you have 30–39 quarters, you pay $285/month. Under 30 quarters: $519/month (2026 estimates).
Cost-sharing: You still pay a deductible ($1,632 per benefit period in 2026) and daily coinsurance for long hospital stays.
Medicare Part B: Medical Insurance
What it covers:
- Doctor visits and outpatient care
- Preventive services (free annual wellness visit, flu shots, cancer screenings)
- Lab tests, imaging, and equipment
- Some home health and ambulance services
What it costs: The standard premium is $185/month in 2026. Higher earners pay more via IRMAA (Income-Related Monthly Adjustment Amount):
| 2024 Income (Individual) | 2026 Part B Premium |
|---|---|
| Up to $106,000 | $185.00 |
| $106,001–$133,000 | $259.00 |
| $133,001–$167,000 | $333.00 |
| $167,001–$200,000 | $407.10 |
| $200,001–$500,000 | $481.20 |
| Over $500,000 | $555.50 |
Cost-sharing: $257 annual deductible, then Medicare pays 80% of approved costs. You pay 20% — with no out-of-pocket maximum under Original Medicare.
The "No Cap" Problem With Original Medicare
Here's the biggest risk most people don't understand: Original Medicare (Parts A + B) has no out-of-pocket maximum. If you have a serious illness requiring expensive treatment, your 20% coinsurance can run into tens of thousands of dollars.
This is why most retirees add either a Medigap (Supplement) policy or choose Medicare Advantage.
Medicare Part C: Medicare Advantage
Medicare Advantage plans are private insurance alternatives to Original Medicare. They must cover everything Parts A and B cover, but typically also include:
- Dental, vision, and hearing coverage (not covered by Original Medicare)
- Prescription drug coverage (Part D bundled in)
- Out-of-pocket maximum (the crucial protection Original Medicare lacks)
- Extras like gym memberships, transportation to appointments
What it costs: Many plans have $0 additional premium beyond the Part B premium you already pay. Others charge $50–$200/month more.
The trade-off: Medicare Advantage uses networks. You may need referrals to see specialists, and out-of-network care may not be covered. Original Medicare + Medigap offers more provider flexibility.
Medigap (Medicare Supplement) Insurance
Medigap fills the "gaps" in Original Medicare — covering your deductibles, coinsurance, and copays. Popular plans include Plan G (comprehensive, covers almost everything except Part B deductible) and Plan N (lower premium but some copays).
What it costs: $100–$300+/month depending on your age, location, and plan chosen. Plan G typically runs $120–$200/month for a 65-year-old.
When to buy: Buy Medigap during your 6-month Medigap open enrollment window starting the month you turn 65 and enroll in Part B. During this window, you cannot be denied or charged more for pre-existing conditions. After the window closes, insurers can reject you or charge you more based on health.
Medicare Part D: Prescription Drug Coverage
Part D covers prescription medications through private plans. If you have Original Medicare, you add Part D separately. If you have Medicare Advantage, it's usually bundled in.
What it costs: Varies by plan — average around $50–$100/month. Plans also have deductibles and tiered copays based on drug category.
Low-income help: The Extra Help (Low Income Subsidy) program can cover most Part D costs for qualifying beneficiaries.
Enrollment Deadlines: Don't Miss These
Missing Medicare enrollment deadlines leads to permanent premium penalties.
Initial Enrollment Period (IEP): A 7-month window surrounding your 65th birthday — 3 months before, the month of, and 3 months after. Enroll during the first 3 months for coverage starting on your birthday month.
Late enrollment penalties:
- Part B: 10% premium increase for each full 12-month period you were eligible but didn't enroll. This penalty is permanent.
- Part D: 1% per month penalty for each month without creditable drug coverage. Also permanent.
If you're still working at 65: If you have employer coverage from a large employer (20+ employees), you can delay Medicare enrollment without penalty. Enroll within 8 months of leaving your employer plan.
Special Enrollment Period (SEP): 8-month window after employer coverage ends. Do not rely on COBRA as your "employer coverage" — COBRA doesn't extend your SEP.
Original Medicare vs Medicare Advantage: How to Choose
| Factor | Original Medicare + Medigap | Medicare Advantage |
|---|---|---|
| Network | Any Medicare-accepting provider nationwide | Network-based (HMO or PPO) |
| Out-of-pocket max | None (Medigap covers it) | Required cap (~$8,000–$9,000) |
| Dental/vision/hearing | Not covered | Usually included |
| Prescription drugs | Separate Part D plan | Usually bundled |
| Monthly cost | Higher (Part B + Medigap + Part D) | Lower (just Part B + plan premium) |
| Travel coverage | Nationwide + some foreign | Network restrictions may apply |
Rule of thumb: If you want maximum flexibility and travel frequently, Original Medicare + Medigap is the gold standard. If you're budget-conscious, healthy, and prefer a managed care approach, Medicare Advantage may work well — just read the network and prior authorization requirements carefully.
Planning for Medicare Before Age 65
Use your HSA wisely: HSA funds can pay Medicare premiums (Parts B, C, D) and out-of-pocket costs tax-free. This is a powerful tool — fund your HSA aggressively in your 50s specifically to pay healthcare costs in retirement tax-free.
IRMAA planning: Your 2026 Part B premium is based on your 2024 income. Large Roth conversions, capital gains, or retirement account withdrawals in your early 60s can push you into a higher IRMAA bracket two years later. Model this before major financial moves.
Early retirement gap: If you retire before 65, you'll need to bridge 1–5 years before Medicare kicks in. Options: COBRA, ACA Marketplace (subsidized if income is managed carefully), retiree benefits from employer, or a spouse's plan.
FAQ
Can I have Medicare and employer insurance at the same time?
Yes. The question is which pays first (primary vs secondary). If your employer has 20+ employees, employer insurance is primary; Medicare is secondary. Under 20 employees, Medicare is typically primary.
Is Medicare free?
Part A is usually free. Part B has a premium (~$185/month). You also pay deductibles and coinsurance. Between Part B, Part D, and Medigap, expect total Medicare costs of $300–$700+/month in retirement — budget for this.
What does Medicare not cover?
Original Medicare doesn't cover: routine dental, routine vision, hearing aids, long-term custodial care, most care outside the U.S., and cosmetic procedures. Many of these can be added through Medicare Advantage plans.
When should I sign up for Medicare if I'm on a spouse's plan?
You can delay without penalty as long as you're covered by active employer insurance (not retiree insurance, not COBRA). When that coverage ends, you have an 8-month SEP to enroll.
Try the Calculator
Use our Medicare Cost Calculator to estimate your total annual Medicare costs based on your income, health status, and plan preferences.
Sources
- Centers for Medicare & Medicaid Services — Medicare & You 2026 (medicare.gov)
- Social Security Administration — Medicare Premiums 2026 (ssa.gov)
- Kaiser Family Foundation — Medicare Advantage 2026 (kff.org)