Medicare Explained: Parts A, B, C, and D Decoded for Beginners

Medicare enrollment is one of the most important financial decisions you'll make as you approach 65 - and the system is notoriously confusing. There are four parts, multiple enrollment periods, and penalties for late signup that last forever. Here's everything you need to know, translated from government-speak into plain English.

Medicare Part A: Hospital Insurance

Part A covers inpatient hospital stays, skilled nursing facility care (after a hospital stay), hospice care, and some home health services. Most people qualify for premium-free Part A based on their work history (or their spouse's) - if you or your spouse paid Medicare taxes for 10+ years, Part A costs $0/month in premiums.

However, Part A has costs when you use it: a $1,632 deductible per benefit period (2026) for hospital stays, $0 copay for days 1-60 of a hospital stay, $408/day for days 61-90, and $816/day for lifetime reserve days (91-150). After 150 days, you pay 100%. These costs are why supplemental coverage (Medigap or Medicare Advantage) is important.

Medicare Part B: Medical Insurance

Part B covers doctor visits, outpatient care, preventive services, durable medical equipment, mental health services, and ambulance services. Unlike Part A, Part B has a monthly premium: the standard 2026 premium is $185/month, but higher-income individuals pay more (up to $578/month for incomes over $500,000).

After a $240 annual deductible, Part B covers 80% of approved services. You pay the remaining 20% coinsurance with no cap - meaning a $100,000 surgery leaves you with a $20,000 bill. This unlimited 20% exposure is the primary reason people buy supplemental coverage.

Medicare Part C: Medicare Advantage

Medicare Advantage plans are private insurance alternatives to Original Medicare (Parts A and B). They must cover everything Original Medicare covers, plus most include prescription drug coverage and extras like dental, vision, hearing, and gym memberships. Monthly premiums can be as low as $0 on top of your Part B premium.

The tradeoff: Medicare Advantage plans use networks (HMO or PPO), so you must use in-network providers in most cases. Original Medicare lets you see any doctor who accepts Medicare - no network restrictions. If flexibility matters and you're willing to pay for it, Original Medicare plus a Medigap supplement may be better. If cost savings and extra benefits matter more, Medicare Advantage is compelling.

Medicare Part D: Prescription Drug Coverage

Part D covers prescription medications through private insurance plans. You can add a standalone Part D plan to Original Medicare, or get drug coverage included in a Medicare Advantage plan. Part D plans have their own premiums ($10-$80/month), deductibles (up to $590 in 2026), and drug formularies.

Thanks to the Inflation Reduction Act, out-of-pocket prescription drug costs are now capped at $2,000/year for all Part D plans starting in 2025. This is a massive change for people with expensive medications who previously faced unlimited costs in the "catastrophic" coverage phase.

When to Enroll

Initial Enrollment Period (IEP): A 7-month window around your 65th birthday (3 months before, your birthday month, and 3 months after). This is the most important window. Enroll in Part B during your IEP to avoid late enrollment penalties - a 10% premium surcharge for each 12-month period you were eligible but didn't enroll, lasting for life.

Exception - employer coverage: If you're still working at 65 and have coverage through your (or your spouse's) employer with 20+ employees, you can delay Part B enrollment without penalty. You then get a Special Enrollment Period when that employer coverage ends.

Original Medicare + Medigap vs. Medicare Advantage

Choose Original Medicare + Medigap if: You want to see any doctor who accepts Medicare (no network). You travel frequently within the U.S. You can afford the Medigap premium ($100-$300/month on top of Part B). You want predictable, low out-of-pocket costs for hospitalizations and major procedures.

Choose Medicare Advantage if: You want the lowest monthly premium possible. You don't mind using a provider network. You want extra benefits (dental, vision, hearing, gym) included. You prefer one plan that covers everything rather than managing separate Part A, B, D, and Medigap plans.