Medicare for seniors: what it covers, what it costs, and how to choose

Medicare is divided into four parts, each covering a different slice of care. Understanding them as a set makes enrollment decisions much clearer.

Part A: hospital insurance

Part A covers inpatient hospital stays, skilled nursing facility (SNF) care after a qualifying hospital admission, some home health services, and hospice care.

Part A is premium-free for people who have worked 40 or more quarters (about 10 years) in Medicare-taxed employment. People with 30 to 39 quarters pay $311 per month in 2026; those with fewer than 30 quarters pay $565 per month in 2026.

Cost-sharing matters here. In 2026, the Part A inpatient deductible is $1,736 per benefit period, not per calendar year. A benefit period begins when you are admitted and ends after you have been out of the hospital or SNF for 60 consecutive days. Two hospitalizations separated by more than 60 days each trigger a separate $1,736 deductible.

For longer hospital stays in a single benefit period, coinsurance applies: $434 per day for days 61 to 90 in 2026. Each Medicare beneficiary also has 60 lifetime reserve days available at $868 per day in 2026; once used, they are gone.

For SNF stays: days 1 to 20 are fully covered after a qualifying 3-day formal inpatient admission (observation status does not count). Days 21 to 100 carry coinsurance of $217 per day in 2026. After day 100, Medicare pays nothing.

Part B: medical insurance

Part B covers outpatient services: doctor visits, preventive screenings, lab work, durable medical equipment, mental health services, and some home health care.

In 2026, the standard Part B premium is $202.90 per month. The annual Part B deductible is $283 in 2026. After the deductible, Medicare pays 80 percent of the approved amount and you pay 20 percent, with no annual cap on that 20 percent. That uncapped coinsurance is why many seniors add supplemental coverage.

Higher-income beneficiaries pay more through Income-Related Monthly Adjustment Amounts (IRMAA), which are surcharges applied to both Part B and Part D premiums. IRMAA uses a two-year lookback: 2026 premiums are based on 2024 income. The surcharges begin above $109,000 for single filers and $218,000 for joint filers, then increase through additional tiers. If your income has dropped due to retirement or another life-changing event, you can request a new determination using form SSA-44 within 60 days of receiving your IRMAA notice.

Providers who do not accept Medicare assignment may charge up to 15 percent above the Medicare-approved amount; some states ban these excess charges entirely.

Part C: Medicare Advantage

Medicare Advantage (MA), also called Part C, is an alternative way to receive all Part A and Part B benefits through a private insurer approved by Medicare. Most MA plans also include Part D drug coverage and may offer extra benefits such as dental, vision, and hearing services.

MA plans set their own cost-sharing structures within federal limits. In 2026, the federal in-network maximum out-of-pocket (MOOP) cap is $9,250; the combined in-network and out-of-network cap is $13,900. According to KFF, the 2026 enrollment-weighted average in-network MOOP is $5,421, meaning many plans set limits below the federal ceiling. Plans may set lower limits, and $0-premium options are common but availability varies by market.

Starting in 2026, under CMS rule CMS-0057-F, standard prior-authorization decisions must come within 7 calendar days and expedited decisions within 72 hours, with written reasons required for denials.

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

Part D: prescription drug coverage

Part D covers outpatient prescription drugs through private plans that contract with Medicare. In 2026, no Part D plan may set a deductible above $615, and out-of-pocket spending on covered drugs is capped at $2,100 for the year. Once that cap is reached, covered drugs cost $0 for the rest of the calendar year. This $2,100 cap is the result of the Inflation Reduction Act eliminating the previous coverage gap (the "donut hole").

The national base beneficiary premium in 2026 is $38.99. This figure matters primarily because the Part D late-enrollment penalty is calculated as 1 percent of this base premium for each full month you went without creditable drug coverage after your Initial Enrollment Period (IEP). The penalty is permanent and added to your monthly premium.

Initial enrollment period (IEP)

Your IEP is seven months long: the three months before your 65th birthday month, your birthday month, and the three months after. Enrolling before your birthday month means Part B starts on the first of your birthday month. Enrolling in the three months after delays your start date.

Special enrollment period (SEP) for employer coverage

If you have active employer coverage from a current employer with 20 or more employees, you can delay Part B without penalty. The 8-month Part B SEP begins when employment or employer coverage ends, whichever comes first. Critical note: COBRA and retiree coverage never count as active employer coverage for SEP or late-penalty purposes. Losing COBRA does not restart the SEP clock.

Annual and open enrollment periods

The Annual Enrollment Period (AEP) runs October 15 to December 7 each year. During AEP, you can join, switch, or drop a Medicare Advantage or Part D plan for the following year. The Medicare Advantage Open Enrollment Period (MA OEP) runs January 1 to March 31 and allows people already enrolled in an MA plan to switch plans or return to Original Medicare.

A note on HSAs

Enrolling in any part of Medicare, including premium-free Part A, ends your eligibility to contribute to a Health Savings Account (HSA). Because Part A can backdate enrollment up to six months, you should stop HSA contributions at least six months before enrolling to avoid tax penalties.

Original Medicare (Parts A and B) leaves significant cost-sharing gaps, particularly the uncapped 20 percent Part B coinsurance. Medicare Supplement Insurance, called Medigap, fills some or all of those gaps. Your guaranteed-issue window to buy any Medigap plan at standard rates is six months, beginning the month you are 65 and enrolled in Part B. Outside that window, insurers can use medical underwriting in most states.

Protections after the initial window vary by state and fall into distinct categories: some states (such as New York and Connecticut) offer year-round guaranteed issue; Washington allows plan-to-plan switching; a growing number of states use birthday-rule protections, including California, Oregon, and others, with New Mexico's birthday rule effective January 2027.

High-deductible versions of Plans G and F carry a CMS-set deductible of $2,950 in 2026, offering lower monthly premiums in exchange for higher initial cost-sharing.