Medicare Explained for Beginners: Parts A, B, C, and D (2026)

Medicare covers tens of millions of Americans — and confuses nearly all of them. The four-part structure, overlapping enrollment periods, and coverage gaps catch people off guard every year. Understanding how it works before you turn 65 can save you thousands in permanent penalties and surprise out-of-pocket costs.

Medicare Part A: Hospital insurance

Part A is the hospital side of Medicare. It covers inpatient care and a handful of related institutional services.

What it covers:

• Inpatient hospital stays
• Skilled nursing facility (SNF) care after a qualifying hospital stay
• Hospice care
• Some home health care

What it costs in 2026:

• Premium: $0 for most people. If you or your spouse paid Medicare payroll taxes for at least 10 years (40 quarters), Part A is premium-free.
• Inpatient deductible: $1,736 per benefit period — not per year. A new benefit period can start if you're readmitted after 60 days out of the hospital, so a bad year could mean paying it more than once. (CMS)
• Hospital coinsurance: $0/day for days 1–60; $434/day for days 61–90; $868/day for each "lifetime reserve" day beyond 90. (CMS)
• Skilled nursing facility coinsurance: $0 for days 1–20, then $217/day for days 21–100. (CMS)

The "benefit period" structure is one of Medicare's most misunderstood features. Unlike a calendar-year deductible, Part A's clock resets, which is exactly why many people pair Original Medicare with a supplement (more on that below).

Medicare Part B: Medical insurance

Part B is the outpatient side — the doctors, tests, and equipment you use without being admitted.

What it covers:

• Doctor and specialist visits
• Lab tests and imaging
• Outpatient surgery and procedures
• Durable medical equipment (walkers, wheelchairs, oxygen)
• Preventive services (annual wellness visit, screenings, many vaccines)
• Outpatient mental health services

What it costs in 2026:

• Standard premium: $202.90/month. (CMS)
• Annual deductible: $283. (CMS)
• Coinsurance: You generally pay 20% of the Medicare-approved amount after the deductible — and Original Medicare puts no cap on that 20%.

That missing out-of-pocket cap is a big deal. With Original Medicare alone, a serious illness can keep generating 20% bills indefinitely. (For how caps work elsewhere in health insurance, see our guide to the out-of-pocket maximum.)

Higher earners pay more: IRMAA

If your income is above a threshold, you pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of the standard Part B premium — and on top of your Part D premium too. For 2026, IRMAA kicks in above a modified adjusted gross income (MAGI) of $109,000 for individuals and $218,000 for married couples filing jointly, based on your tax return from two years earlier. (Medicare.gov) The surcharge rises in tiers as income climbs; the exact 2026 amounts are published by the Social Security Administration.

The big decision: Original Medicare vs. Medicare Advantage

This is the fork in the road that defines your whole Medicare experience. You generally pick one of two paths.

Feature	Original Medicare (A + B, usually + D + Medigap)	Medicare Advantage (Part C)
Who runs it	Federal government	Private insurers approved by Medicare
Doctor choice	Any provider that accepts Medicare (nearly all)	Usually a network (HMO or PPO)
Referrals / prior authorization	Rarely required	Often required
Out-of-pocket cap	None on its own; a Medigap plan adds protection	Yes — a federally set annual cap on in-network care
Extra benefits (dental, vision, hearing)	Not included	Often bundled in
Best for	Travelers, people who want any doctor, predictable costs via Medigap	People who want low or $0 premiums and bundled extras, and are comfortable with a network

Medicare Part C: Medicare Advantage

Medicare Advantage plans are private "all-in-one" alternatives to Original Medicare. By law they must cover everything Parts A and B cover, and most include Part D drug coverage plus extras like dental, vision, hearing, and gym memberships.

What to weigh:

• Premiums range from $0 to $100+/month on top of your Part B premium. A $0 plan still requires you to keep paying Part B.
• Networks matter. Like an HMO or PPO, Advantage plans restrict you to in-network providers (or charge more out of network), and many require prior authorization for specialist or hospital care.
• The out-of-pocket cap is the genuine advantage. Every Advantage plan must cap your annual in-network spending, which Original Medicare alone does not.

Advantage now covers more than half of all Medicare enrollees. It can be a great fit for the extras and the spending cap — but it can frustrate people who travel frequently or want to see any doctor without authorization hurdles.

Medicare Part D: Prescription drug coverage

Part D covers prescription drugs. You can buy a standalone Part D plan to pair with Original Medicare, or get drug coverage bundled inside most Medicare Advantage plans.

2026 key numbers:

• Deductible: No Part D plan may charge a deductible higher than $615. (CMS)
• Out-of-pocket maximum: $2,100. Once your out-of-pocket drug spending hits this cap, you pay nothing more for covered drugs the rest of the year — a protection phased in under the Inflation Reduction Act. (CMS)
• Premiums vary widely by plan; higher earners also pay a Part D IRMAA surcharge.

Don't skip it without coverage. If you go without Part D (or other creditable drug coverage) when first eligible, you face a permanent late-enrollment penalty — see the worked example below.

Enrollment windows: the rules that trip people up

Window	When	What it's for
Initial Enrollment Period (IEP)	The 7 months around your 65th birthday: the 3 months before, your birthday month, and the 3 months after	First time signing up for Parts A and B
General Enrollment Period (GEP)	January 1 – March 31 each year	For people who missed their IEP and have no special exception
Special Enrollment Period (SEP)	Up to 8 months after employer coverage ends	Lets you delay Part B penalty-free if you had qualifying job-based coverage
Annual Enrollment Period (AEP)	October 15 – December 7	Change Advantage or Part D plans for next year
Medicare Advantage Open Enrollment	January 1 – March 31	Switch Advantage plans or drop back to Original Medicare

If you're still working at 65 with solid employer coverage, the Special Enrollment Period is what lets you delay Part B without penalty. The rules around losing job-based coverage closely mirror the logic of a special enrollment period in the under-65 marketplace.

Worked example: what the late penalty actually costs

Penalties are abstract until you put numbers on them. Suppose you retire at 65 with no other coverage but decide to skip Part B for three full years to save money.

• Part B penalty: 10% for each full 12-month period you delayed. Three years late means a 30% surcharge added to your premium — and it's permanent. On the 2026 standard premium of $202.90, that's roughly $61 extra every month, for life, even after the standard premium rises in future years.
• Part D penalty: 1% of the national base beneficiary premium for every month without creditable drug coverage. Skip it for 36 months and you carry a 36% surcharge on your Part D premium indefinitely.

The lesson: the "savings" from skipping coverage are temporary, but the penalties follow you for the rest of your life. Enroll on time, or make sure your employer plan counts as creditable coverage.

Medigap (Medicare Supplement): filling the gaps

Original Medicare leaves real holes — the Part A deductible, the Part B 20% coinsurance, and no out-of-pocket maximum. Medigap policies, sold by private insurers, pay some or all of those leftover costs.

Two popular standardized plans:

• Plan G: Covers nearly everything except the Part B deductible. The most comprehensive choice available to people who became eligible for Medicare in 2020 or later.
• Plan N: Lower premiums in exchange for small copays at the doctor and emergency room.

Medigap premiums vary by age, location, and insurer, and the policy only works with Original Medicare — you cannot use Medigap with a Medicare Advantage plan. One critical timing rule: in most states, your strongest guaranteed right to buy any Medigap policy (without medical underwriting) is a six-month window that starts when you're 65 and enrolled in Part B. Miss it, and an insurer may be able to deny you or charge more based on health.

How Medicare interacts with HSAs and employer coverage

Two overlaps cause the most confusion — and the most avoidable mistakes.

Health Savings Accounts (HSAs): Once you enroll in any part of Medicare, you can no longer make new contributions to an HSA. You can still spend existing HSA funds tax-free on qualified medical costs (including some Medicare premiums), but new deposits must stop. If you plan to keep contributing to an HSA past 65 because you're still working, you have to delay Medicare enrollment — including the premium-free Part A. Note that claiming Social Security automatically enrolls you in Part A, which ends HSA eligibility. (For how these accounts work generally, see our HSA vs. FSA guide.)

Employer coverage: If you (or your spouse) are actively working and covered by an employer group plan, the size of the employer matters. At large employers, that coverage is usually primary and you can safely delay Part B until you retire, then use your Special Enrollment Period. At small employers, Medicare often becomes primary at 65, so delaying Part B can leave you badly exposed. Confirm with your benefits administrator before deciding. If your job-based coverage ends, you may also be weighing COBRA continuation coverage — but note that COBRA does not count as the kind of active employer coverage that protects you from the Part B late penalty.

Common mistakes to avoid

• Assuming COBRA or retiree coverage delays Part B. It usually doesn't. Only active-employment coverage protects you from the penalty.
• Letting Social Security auto-enroll you in Part A while you're still contributing to an HSA. That quietly ends your HSA eligibility.
• Choosing a $0-premium Advantage plan on price alone. Check the network, the prior-authorization rules, and the out-of-pocket cap before enrolling.
• Waiting past your Medigap open-enrollment window. Buy your supplement when you have guaranteed-issue rights; later, you may be underwritten.
• Skipping Part D because you take few drugs today. The penalty compounds for every month you wait, and your prescriptions can change overnight.

Frequently asked questions

What are the four parts of Medicare? Medicare Part A covers hospital stays, skilled nursing facility care, hospice, and some home health care. Part B covers doctor visits, outpatient care, preventive services, and durable medical equipment. Part C (Medicare Advantage) is a private insurance alternative to Original Medicare that bundles Parts A and B and usually adds Part D drug coverage. Part D covers prescription drugs.

How much does Medicare Part B cost in 2026? The standard Medicare Part B premium is $202.90 per month in 2026, with an annual deductible of $283. Higher earners pay more through an income-related monthly adjustment amount (IRMAA), which begins above a modified adjusted gross income of $109,000 for individuals or $218,000 for married couples filing jointly.

What is the Medicare late-enrollment penalty? If you delay Part B without other creditable coverage, your premium rises 10% for each full 12-month period you could have been enrolled, and the penalty is permanent. The Part D late penalty adds 1% of the national base beneficiary premium for every month you went without creditable drug coverage, also for life.

Sources & further reading

• 2026 Medicare Parts A & B Premiums and Deductibles — CMS
• Final CY 2026 Part D Redesign Program Instructions — CMS
• Initial IRMAA Determination — Medicare.gov
• Medicare costs at a glance — Medicare.gov
• Medicare drug coverage (Part D) costs — Medicare.gov

This article is general educational information, not personalized financial, insurance, or medical advice. Costs, thresholds, and rules change every year. Always verify the current figures and how they apply to your situation at Medicare.gov or with a licensed Medicare advisor before making enrollment decisions.