Quick Summary
Medicare is the federal health insurance program for people 65 and older (and some younger people with disabilities). It has four parts: Part A (hospital), Part B (medical), Part C (Medicare Advantage), and Part D (prescription drugs). Most people enroll during a 7-month window around their 65th birthday. Missing this window can result in permanent late penalties.
What Is Medicare?
Medicare is the federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS). It was signed into law in 1965 and today covers more than 67 million Americans - primarily people 65 and older, as well as certain younger individuals with qualifying disabilities or conditions.
Unlike employer-sponsored health insurance, Medicare is not a single plan. It is a framework of different "parts," each covering a different category of health care. Understanding how these parts work together - and how to choose the right combination for your situation - is the foundation of making smart Medicare decisions.
Medicare is funded through payroll taxes (the Medicare tax you've paid throughout your working life), monthly premiums paid by enrollees, and general federal revenue. Most people who have worked and paid Medicare taxes for at least 10 years receive Part A at no cost.
Who Qualifies for Medicare?
You are eligible for Medicare if you meet one of the following criteria:
Age 65+
You are 65 or older and a U.S. citizen or permanent legal resident who has lived in the U.S. for at least 5 continuous years.
Disability
You have been receiving Social Security Disability Insurance (SSDI) benefits for 24 months.
ALS (Lou Gehrig's Disease)
You have ALS - Medicare begins the same month your SSDI benefits start, with no 24-month waiting period.
End-Stage Renal Disease (ESRD)
You have permanent kidney failure requiring dialysis or a kidney transplant, regardless of age.
Working past 65? If you have active employer coverage from a company with 20+ employees, you can delay Medicare without penalty. However, you must enroll within 8 months of losing that coverage or you'll face permanent late enrollment penalties.
The 4 Parts of Medicare
Medicare is divided into four parts. Most people need at least Parts A and B - and then choose between adding Part D (drug coverage) or enrolling in a Medicare Advantage plan (Part C) that bundles everything together.
What It Covers
- Inpatient hospital stays
- Skilled nursing facility care
- Hospice care
- Some home health care
Cost
Free for most people (if you or your spouse paid Medicare taxes for 10+ years)
Most people pay $0 premium for Part A.
What It Covers
- Doctor visits & outpatient care
- Preventive services
- Durable medical equipment
- Mental health services
Cost
Standard premium: $202.90/month in 2026 (income-based adjustments may apply)
You pay 20% of most services after your deductible.
What It Covers
- All Part A & B benefits
- Often includes dental, vision, hearing
- Many plans include Part D
- Extra benefits vary by plan
Cost
Many plans have $0 premium; you still pay your Part B premium
Offered by private insurers - network restrictions apply.
What It Covers
- Prescription medications
- Retail & mail-order pharmacy
- Specialty drugs (with prior auth)
- Vaccines in some plans
Cost
Average premium ~$38.99/month in 2026; varies by plan and drugs needed
Penalty applies if you delay enrollment without creditable coverage.
Original Medicare vs. Medicare Advantage
This is the most important decision most Medicare enrollees face. Both options cover the same core services, but they work very differently. Here is a direct comparison:
| Feature | Original Medicare (Parts A + B) | Medicare Advantage (Part C) |
|---|---|---|
| Who provides it? | Federal government | Private insurance company |
| Network restrictions? | See any doctor who accepts Medicare | Usually limited to plan network (HMO/PPO) |
| Referrals needed? | No referrals required | HMO plans usually require referrals |
| Out-of-pocket maximum? | No cap - unlimited exposure | Annual cap ($9,250 in-network / $13,900 in+out combined) |
| Dental/Vision/Hearing? | Not covered | Often included |
| Prescription drugs? | Need separate Part D plan | Usually bundled in |
| Travel coverage? | Nationwide - any Medicare provider | Limited outside plan area |
| Monthly cost? | Part B premium + Medigap premium | Often $0 premium + Part B premium |
| Best for? | Those who want maximum flexibility | Those who want extra benefits & cost predictability |
Neither option is universally "better" - the right choice depends on your health, budget, preferred doctors, and how much you travel. A licensed Medicare agent can help you compare plans available in your specific zip code.
Medicare Enrollment Periods
When you can enroll in Medicare - and when you can make changes - is governed by specific enrollment periods. Missing the right window can result in permanent penalties or coverage gaps.
Initial Enrollment Period (IEP)
When: 7-month window: 3 months before your 65th birthday month, your birthday month, and 3 months after
This is your first and most important enrollment window. Missing it can result in permanent late penalties.
Penalty: 10% per year late penalty on Part B; 1% per month on Part D
Special Enrollment Period (SEP)
When: 8-month window after losing employer coverage (you or your spouse must have been actively working)
If you're still working past 65 with employer coverage, you can delay Medicare without penalty - but only if the employer has 20+ employees.
Penalty: No penalty if you enroll during SEP
Annual Enrollment Period (AEP)
When: October 15 – December 7 every year; changes take effect January 1
Use AEP to switch Medicare Advantage plans, switch from Original Medicare to Advantage (or back), or change your Part D drug plan.
Penalty: No penalty - this is your annual review window
General Enrollment Period (GEP)
When: January 1 – March 31 each year; coverage starts July 1
This is the fallback window if you missed your IEP and don't qualify for a SEP. You will likely owe late enrollment penalties.
Penalty: Permanent late penalties apply
What Does Medicare Cost in 2026?
Medicare costs vary significantly depending on which parts and plans you choose. Here are the key 2026 figures:
| Coverage | 2026 Cost | Notes |
|---|---|---|
| Part A Premium | $0 (most people) | Free if 40+ quarters of Medicare taxes paid |
| Part A Deductible | $1,736 per benefit period | Applies each time you're admitted to hospital |
| Part B Premium | $202.90/month | Higher for incomes over $109,000 (IRMAA) |
| Part B Deductible | $283/year | Then you pay 20% of most services |
| Part D Premium | ~$38.99/month avg. | Varies by plan; income adjustments apply |
| Medicare Advantage | $0 avg. premium | You still pay Part B premium; copays apply |
| Medigap (Plan G) | $100–$250/month | Covers most out-of-pocket costs after Part B deductible |
Medicare Supplement Insurance (Medigap)
Original Medicare pays about 80% of most covered services. The remaining 20% - plus deductibles - is your responsibility, with no annual cap. For someone with a serious illness, this exposure can be substantial.
Medigap (also called Medicare Supplement) is private insurance that fills in these gaps. There are 10 standardized Medigap plans (labeled A through N) sold by private insurers. The most popular plans are Plan G (covers almost everything except the Part B deductible) and Plan N (lower premium with some copays).
Most comprehensive. Covers all gaps except the Part B deductible ($283/year). Best for predictable costs.
Lower premium than Plan G. You pay up to $20 copay for office visits and $50 for ER visits.
Basic coverage. Covers Part A coinsurance and hospital costs. Lower premium but less protection.
Important: You have a guaranteed right to buy any Medigap plan during your 6-month open enrollment window (starting when you're 65 and enrolled in Part B). After that window, insurers can deny you or charge more based on health conditions in most states.
6 Common Medicare Mistakes to Avoid
These are the mistakes we see most often - and the ones that are most costly to fix.
Missing your Initial Enrollment Period
If you don't enroll when you first become eligible and don't have qualifying employer coverage, you'll pay a permanent late penalty - 10% added to your Part B premium for every 12-month period you were eligible but didn't enroll.
Assuming Medicare covers everything
Original Medicare does not cover dental, vision, hearing, or long-term care. It also has no out-of-pocket maximum, meaning a serious illness could cost you tens of thousands of dollars without supplemental coverage.
Not comparing Part D plans annually
Drug plan formularies (the list of covered drugs) change every year. A plan that covered your medications cheaply this year may not next year. Always review your plan during the Annual Enrollment Period.
Choosing a plan based on premium alone
A $0 premium Medicare Advantage plan may have high copays, narrow networks, and prior authorization requirements that cost you far more than a plan with a modest premium. Always look at total out-of-pocket costs.
Not checking if your doctors are in-network
Medicare Advantage plans use provider networks. Before enrolling, verify that your primary care doctor, specialists, and preferred hospital are all in the plan's network - or you may face much higher costs or no coverage at all.
Waiting too long to apply for Medigap
During your 6-month Medigap Open Enrollment Period (starts when you're 65 and enrolled in Part B), insurers cannot deny you or charge more based on health conditions. After that window closes, you may be medically underwritten and denied.
Your Next Steps
Understanding Medicare is the first step. Here's a simple action plan based on where you are in the process:
Determine your eligibility date
If you're turning 65, your Initial Enrollment Period starts 3 months before your birthday month. Mark it on your calendar.
Decide: Original Medicare or Medicare Advantage?
Consider your doctors, medications, travel habits, and budget. There's no universal right answer - it depends on your situation.
Compare Part D or Advantage plans in your zip code
Plans vary significantly by area. Use Medicare's Plan Finder tool at Medicare.gov or work with a licensed independent agent.
If choosing Original Medicare, apply for Medigap during your open enrollment window
This is your guaranteed-issue window. Don't wait - it closes 6 months after you enroll in Part B.
Enroll through Social Security
Apply online at SSA.gov, call 1-800-772-1213, or visit your local Social Security office. Apply 3 months before your coverage start date.
Review your plan every year during AEP (Oct 15 – Dec 7)
Plans change annually. Your current plan may no longer be the best fit next year.
Frequently Asked Questions
Disclaimer
This guide is for educational purposes only and does not constitute legal, financial, or medical advice. Medicare rules, premiums, and plan availability change annually. Always verify current information at Medicare.gov or consult with a licensed Medicare insurance agent before making enrollment decisions. Medicare Information Project is a licensed independent insurance agency - we represent multiple carriers and do not charge fees for our services.
