Medicare explained: the parts, the costs, and how to enroll

The program is built from four parts, and each one does a different job. Part A covers hospital care, Part B covers outpatient and doctor care, Part C is the private-plan alternative to A and B, and Part D covers prescription drugs. You can hold these in different combinations, which is where most of the confusion starts.

The short version

• Original Medicare is Part A (hospital) plus Part B (medical); you can add Part D for drugs and a Medigap policy to fill cost gaps.
• Medicare Advantage (Part C) bundles A, B, and usually D into one private plan with its own network and rules.
• In 2026, the standard Part B premium is $202.90 per month and the Part B annual deductible is $283.
• Sign up during your seven-month Initial Enrollment Period to avoid lifelong late penalties.

In short: Medicare has four parts, and you choose how to assemble them.

Part A covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health care. Most people pay no monthly premium for Part A because they or a spouse paid Medicare taxes for at least 40 quarters (about 10 years) of work.

If you did not earn enough quarters, you can still buy in. In 2026, the premium is $311 per month if you have 30 to 39 quarters of coverage, and $565 per month if you have fewer than 30 quarters.

Part A does not work like a flat annual deductible. Instead it uses benefit periods, which begin when you are admitted and end after you have been out of a hospital or skilled nursing facility for 60 days in a row.

Here are the 2026 Part A cost-sharing amounts:

Because the deductible resets with each new benefit period, someone with two separate hospitalizations in a year could pay the deductible twice.

In short: Part A is usually premium-free, but hospital stays still carry a per-benefit-period deductible and daily coinsurance.

Part B covers the care you get outside a hospital admission: doctor visits, outpatient procedures, lab tests, durable medical equipment, mental health services, and most preventive care. Unlike Part A, almost everyone pays a monthly premium for Part B.

In 2026, the standard Part B premium is $202.90 per month, up from $185.00 in 2025. The annual Part B deductible is $283, up from $257 in 2025. After you meet that deductible, Medicare typically pays 80% of the approved amount for covered services and you pay the remaining 20%, with no annual cap on that 20%.

That missing cap is the reason many people add either a Medigap policy or choose Medicare Advantage, which we cover below.

When higher earners pay more

If your income is above a set threshold, you pay a surcharge called the Income-Related Monthly Adjustment Amount (IRMAA). Medicare looks back at your tax return from two years earlier, so 2026 premiums are based on your 2024 modified adjusted gross income (MAGI).

The first IRMAA threshold in 2026 is $109,000 for a single filer and $218,000 for joint filers. Below those amounts, you pay the standard premium. Above them, your Part B premium rises through a series of income-based tiers, and a parallel surcharge applies to Part D. CMS sets the full bracket schedule each year.

If your income dropped because of a life event such as retirement or the death of a spouse, you can ask Social Security to reconsider. You have 60 days from the date of your determination letter to file an IRMAA reconsideration.

In short: Part B carries a monthly premium and a 20% coinsurance with no cap, and higher earners pay an income surcharge.

Medicare Advantage (Part C) is the private alternative to Original Medicare. A private insurer, approved by Medicare, delivers your Part A and Part B benefits through a single plan, and most plans include Part D drug coverage plus extras such as dental, vision, or hearing.

The tradeoff is structure. Advantage plans use provider networks, often require referrals, and typically apply prior authorization to certain services. Under federal rules (CMS-0057-F, effective January 1, 2026), a standard prior-authorization decision must come within 7 calendar days, and an expedited request within 72 hours.

Advantage plans do include one thing Original Medicare lacks: an annual out-of-pocket maximum (MOOP). Once your spending hits that ceiling, the plan covers the rest for the year. In 2026, the federal MOOP cap is $9,250 for in-network care and $13,900 for combined in-network and out-of-network care. In practice most plans set lower limits; the enrollment-weighted average in-network MOOP for 2026 is $5,421 (KFF, 2026).

Because benefits, networks, and costs vary widely by plan and by county, there is no single answer to what any given Advantage plan will cost you. To find out more about coverage, please contact us to discuss plan options.

In short: Medicare Advantage bundles your benefits with an out-of-pocket cap, but adds networks and prior-authorization rules.

Part D covers outpatient prescription drugs. You get it either as a standalone plan added to Original Medicare or built into a Medicare Advantage plan. Each plan publishes a formulary, its list of covered drugs, and organizes them into cost tiers.

A major change has taken hold under the Inflation Reduction Act: the coverage gap, long known as the donut hole, is gone. In 2026, your out-of-pocket spending on covered drugs is capped at $2,100 for the year. Once you reach that cap, you pay nothing more for covered drugs for the rest of the year.

Plans still vary in their premiums and deductibles. The national base beneficiary premium for 2026 is $38.99, and no plan may set a deductible higher than $615, though many set it lower or at $0.

If you go 63 days or more without creditable drug coverage after your Initial Enrollment Period, you may owe a late-enrollment penalty when you finally sign up. The Part D penalty adds 1% of the base premium for each full month you went without coverage, and it sticks to your premium for as long as you have Part D.

In short: Part D caps your 2026 drug costs at $2,100, but going without creditable coverage triggers a lasting penalty.

Medigap, also called Medicare Supplement Insurance, is a private policy that pays some of the costs Original Medicare leaves to you, such as the Part A deductible and the Part B 20% coinsurance. You cannot use Medigap with a Medicare Advantage plan; it is designed to work alongside Original Medicare.

Medigap policies are standardized by letter (Plan G, Plan N, and others), so a given letter offers the same benefits from any insurer, though premiums differ. Some plans also cover 365 extra hospital days after your Medicare inpatient days run out.

There are also high-deductible versions of Plans G, F, and J. In 2026, the high-deductible amount is $2,950, meaning you pay covered costs up to that figure before the policy begins to pay.

The best time to buy Medigap is your six-month Medigap Open Enrollment Period, which starts the month you are 65 and enrolled in Part B. During that window, insurers cannot deny you coverage or charge more for health reasons. After it closes, they often can.

In short: Medigap pays down Original Medicare's cost gaps, and your one guaranteed-issue window opens at 65 with Part B.

Timing matters because late enrollment can raise your premiums permanently.

Your Initial Enrollment Period (IEP) is a seven-month window: the three months before the month you turn 65, your birthday month, and the three months after. This is when most people first sign up.

If you delay Part B without other qualifying coverage, the Part B late-enrollment penalty adds 10% to your premium for each full 12-month period you could have had it, and it lasts for as long as you have Part B.

A Special Enrollment Period (SEP) lets you sign up outside the usual windows after certain events, most commonly losing employer coverage. If you were covered by a current employer's group plan, you generally get an SEP to enroll in Part B without penalty.

Two other windows come up every year:

• The Annual Enrollment Period (AEP), October 15 to December 7, lets you join, switch, or drop Medicare Advantage and Part D plans for the coming year.
• The Medicare Advantage Open Enrollment Period, January 1 to March 31, lets people already in an Advantage plan switch to a different one or return to Original Medicare.

If your income is limited, help exists. The Extra Help program (also called the Low-Income Subsidy, or LIS) lowers Part D costs, and Medicare Savings Programs can cover Part A and Part B premiums and cost-sharing. You apply for Extra Help through Social Security.

In short: Enroll during your Initial Enrollment Period, use a Special Enrollment Period if you had employer coverage, and check whether you qualify for Extra Help.

Most people follow one of two paths. The first is Original Medicare (Parts A and B) plus a standalone Part D drug plan, often with a Medigap policy for predictable costs. The second is a Medicare Advantage plan that bundles everything into one private plan with a network and an out-of-pocket cap.

Neither path is universally better. It depends on your doctors, your prescriptions, your travel habits, and how you weigh predictable premiums against pay-as-you-go costs. The figures in this guide are set nationally, but plan-specific details vary by county and by insurer.

To find out more about coverage, please contact us to discuss plan options.

In short: Choose between Original Medicare with add-ons or a bundled Advantage plan based on your doctors, drugs, and cost preferences.