Medicare, explained

The one-minute version

Medicare is federal health insurance for people 65 and older (and some younger people with disabilities). It's built from separate parts that you assemble into one plan — and the choices you make at 65 can lock in your costs and coverage for the rest of your life. The two biggest pitfalls are missing an enrollment deadline (which triggers lifelong penalties) and picking the wrong coverage structure for your health and budget.

The four parts, plainly

• Part A — Hospital. Inpatient hospital, skilled nursing, hospice. Most people pay $0 premium because they paid in through 40+ quarters of work.
• Part B — Medical. Doctor visits, outpatient care, preventive services, equipment. You pay a monthly premium ($202.90 standard in 2026).
• Part C — Medicare Advantage. A private all-in-one alternative that bundles A, B, and usually D, often with extras — but through a network.
• Part D — Drugs. Prescription coverage through a private plan. Skipping it when first eligible can mean a lifelong penalty.

The fork in the road: you either keep Original Medicare (A + B, usually plus a Part D plan and often a Medigap supplement), or you choose a Medicare Advantage plan (Part C) instead. More on that below.

Enrollment windows — and the penalties for missing them

This is where the costly mistakes happen. The key windows:

• Initial Enrollment Period: a 7-month window around your 65th birthday — the 3 months before, your birthday month, and the 3 months after.
• Special Enrollment Period: if you have qualifying group health coverage based on your or your spouse's current employment, you can generally enroll in Part B while covered or within eight months after employment or that coverage ends, whichever happens first. COBRA and retiree coverage do not extend this window. Check coordination rules before delaying Medicare.
• General Enrollment Period (Jan 1–Mar 31): the catch-up window if you missed your initial one.
• Annual Election Period (Oct 15–Dec 7): change Part D or Medicare Advantage plans for the next year.

Miss your window without qualifying coverage and the penalties are permanent: Part B adds 10% for every 12 months you were eligible but didn't enroll, for life. Part D carries its own lifelong late penalty. These are exactly the deadlines a 64-year-old doesn't know to watch for.

Original Medicare vs. Medicare Advantage

There's no universally right answer — it's a genuine tradeoff:

Original Medicare (+ Medigap + Part D)

See almost any doctor nationwide that takes Medicare, no networks or referrals. A Medigap (supplement) policy covers most of the 20% Part B leaves you owing, making costs predictable. You pay a separate Medigap premium. Your federal Medigap Open Enrollment Period lasts six months, starting with the first month you are 65 or older and enrolled in Part B. Outside that window, medical underwriting may apply unless you have another guaranteed-issue right; state protections vary.

Medicare Advantage (Part C)

Some plans have a $0 additional plan premium and extras like dental, vision, and hearing. You still generally pay the Part B premium. Plans have an annual out-of-pocket limit for covered Part A and Part B services; prescription drugs have separate cost-sharing rules. Networks, referrals, prior authorizations, benefits, and costs vary by plan and can change each year.

Part D and your 2026 drug costs

A big change took full effect recently: the old "donut hole" coverage gap is gone, and there's now a hard ceiling on what you pay for covered drugs.

• You pay up to a $615 deductible (some plans lower or waive it), then cost sharing set by your plan (the standard benefit uses 25% coinsurance).
• Once your out-of-pocket spending hits $2,100 in 2026, you're done — you pay $0 for covered drugs the rest of the year.
• The Medicare Prescription Payment Plan lets you spread covered out-of-pocket prescription costs over the remaining months of the calendar year. Your monthly bill can change; the program does not reduce your total drug costs.

If you're a higher earner: IRMAA

Above certain income levels, you pay a surcharge on top of your Part B and Part D premiums — the Income-Related Monthly Adjustment Amount (IRMAA). In 2026 it starts above $109,000 (single) or $218,000 (joint), and at the top can more than triple your Part B premium.

The detail that makes this plannable: IRMAA uses your income from two years earlier — your 2024 return sets your 2026 premiums. That means a one-time income spike (a taxable Roth conversion, taxable gain from a home sale, or taxable inherited-IRA distributions) can raise your Medicare premiums two years later. An inheritance itself generally is not taxable income. If your income dropped because of a life-changing event like retirement, you can appeal with Form SSA-44.

2026 numbers at a glance

The Medicare figures that reset each year — current for 2026:

Figures reflect CMS 2026 Medicare Parts A, B & D amounts. Updated annually. Educational only; not investment, tax, or legal advice. Last reviewed: 2026.

Sources & review

These figures come from official government sources and are reviewed regularly. Figures are subject to change.

Last reviewed: June 2026 · Figures are subject to change. This page is educational only and is not personalized investment, tax, legal, or Medicare advice.

Frequently asked questions