Medicare is the federal health insurance program for Americans 65 and older (and for some younger people with disabilities or certain conditions). It is not automatic: you must actively enroll. And the enrollment windows have real financial consequences if missed. Understanding Medicare basics and your enrollment options is the first step toward protecting your long-term healthcare costs.
Quick answer
Medicare has four parts: Part A covers hospital and inpatient care, Part B covers doctor visits and outpatient care, Part C (Medicare Advantage) bundles A, B, and usually D through a private insurer, and Part D covers prescription drugs. Most people pay $0 a month for Part A and about $185 a month for Part B in 2026. You choose between Original Medicare, typically paired with a Medigap policy and Part D, or a Medicare Advantage plan that trades network restrictions for often-lower premiums and extra benefits. Enroll during your 7-month Initial Enrollment Period around your 65th birthday, since missing it triggers a permanent premium penalty. Use the SwitchWize Money Map to see how a Medicare premium and coinsurance fit into your broader retirement cash flow.
- What matters most
- Your 7-month Initial Enrollment Period
- Action
- Enroll during that window to avoid a permanent penalty
- What matters most
- Whether your plan qualifies for a Special Enrollment Period
- Action
- Confirm with your employer before delaying Part B
- What matters most
- Nationwide access versus network restrictions
- Action
- Original Medicare plus Medigap usually fits better
- What matters most
- Willingness to accept a network and prior authorization
- Action
- Medicare Advantage (Part C) usually fits better
- What matters most
- No annual out-of-pocket cap under Original Medicare
- Action
- Add Medigap, or budget a dedicated cash reserve
The Four Parts
Part A: Hospital Insurance
What it covers: Inpatient hospital care, skilled nursing facility care (after qualifying hospital stay), home health care, hospice care.
What you pay: Most people pay $0/month for Part A premium (if you or your spouse have 40+ quarters of Medicare-covered employment). The deductible for each benefit period in 2026 is approximately $1,680.
What to know: Part A does not cover most outpatient care, regular doctor visits, or prescriptions.
Part B: Medical Insurance
What it covers: Doctor visits, outpatient care, preventive services, medical equipment, lab tests, some home health care.
What you pay: The standard 2026 Part B premium is approximately $185/month (adjusted higher at higher incomes: the Income-Related Monthly Adjustment Amount, or IRMAA, applies above certain income thresholds). After meeting the annual deductible (~$257 in 2026), Part B covers 80% of approved costs; you cover the remaining 20%.
What to know: The 20% coinsurance has no annual cap under Original Medicare, which is why most people add supplemental coverage (Medigap).
Part C: Medicare Advantage
What it is: A private insurance alternative to Original Medicare. Private insurers contract with Medicare to provide all Part A and B benefits (and usually Part D) through their own network plans.
Cost structure: Usually lower premiums than Original Medicare + Medigap, but uses networks (HMO or PPO structure) and prior authorization. Many plans include additional benefits (dental, vision, hearing).
Trade-off: Less flexibility than Original Medicare (no out-of-network coverage in many HMO plans); prior authorization can delay care. Best for people who want lower premiums and do not travel frequently.
Part D: Prescription Drug Coverage
What it covers: Outpatient prescription drugs through private plans that contract with Medicare.
What you pay: Varies widely by plan (premiums typically $10–60/month in 2026). Plans have their own formularies (drug lists), so check your prescriptions are covered before enrolling.
What to know: Covered under Medicare Advantage if you choose Part C; standalone Part D plan needed if on Original Medicare (Parts A + B).
- Late enrollment in Part B creates a 10% permanent premium penalty for each 12-month period you were eligible but did not enroll (exceptions apply if you had employer coverage). This adds up to hundreds of dollars per year forever.
- Medigap (Medicare Supplement) policies fill Original Medicare's gaps, primarily the 20% coinsurance with no cap. The best time to buy is during your Medigap Open Enrollment Period (6 months after Part B enrollment) when no medical underwriting is required.
- IRMAA surcharges for high earners can significantly increase Part B and Part D premiums. At $109,000+ income (individual) or $218,000+ (married, based on income from two years earlier), premiums step up in tiers above the standard amount. See our [2026 IRMAA brackets guide](/learn/2026-irmaa-brackets) for the full tier breakdown.
Enrollment Periods
Initial Enrollment Period (IEP): 7-month window around your 65th birthday: 3 months before, your birthday month, and 3 months after. This is the primary enrollment window.
Special Enrollment Period (SEP): If you have employer coverage at 65 (through your own job or a spouse's), you can delay enrollment without penalty and enroll during a SEP when that coverage ends (8-month window after coverage ends).
General Enrollment Period (GEP): If you missed IEP and do not qualify for SEP, January 1 – March 31 each year. Coverage starts July 1. Late enrollment penalties apply.
Original Medicare vs. Medicare Advantage
- Original Medicare (A+B+Medigap+D)
- Higher (Medigap ~$100–300+)
- Medicare Advantage (Part C)
- Often lower
- Original Medicare (A+B+Medigap+D)
- See any Medicare-accepting provider
- Medicare Advantage (Part C)
- Usually network-restricted
- Original Medicare (A+B+Medigap+D)
- Set by Medigap plan
- Medicare Advantage (Part C)
- Varies ($3,500–8,500+ typical)
- Original Medicare (A+B+Medigap+D)
- None (Medicare only)
- Medicare Advantage (Part C)
- Often includes dental/vision/hearing
- Original Medicare (A+B+Medigap+D)
- Nationwide
- Medicare Advantage (Part C)
- Limited outside network
The choice depends on your health situation, travel habits, preferred providers, and budget. People who travel frequently, have complex health needs, or see specialists regularly often prefer Original Medicare's flexibility. People who want lower premiums and primarily use in-network providers often prefer Medicare Advantage.
Budgeting for What Medicare Doesn't Cover
A simple rule of thumb: since Original Medicare's Part B coinsurance has no annual out-of-pocket cap, budget as if you will owe 20% of a large medical bill in a bad year, either through a Medigap premium or a dedicated cash reserve. Many retirees keep that reserve in a high-yield savings account instead of a low-rate checking account, since the money needs to stay liquid but should still earn something while it sits; a top-paying account currently averages around 4.20%. Use the healthcare cost in retirement calculator to project how a Part B premium, IRMAA surcharge, or Medigap policy compounds over a multi-decade retirement, not just a single year.
- Original Medicare + Medigap
- Higher, roughly $100-300+ for Medigap
- Medicare Advantage
- Often lower, sometimes $0
- Original Medicare + Medigap
- Capped by your Medigap plan
- Medicare Advantage
- Capped by plan, typically $3,500-8,500+
- Original Medicare + Medigap
- Dedicated high-yield savings reserve
- Medicare Advantage
- Same, sized to your plan's out-of-pocket max
What to Do Now
Sources
Current premiums, deductibles, and enrollment rules come directly from Medicare.gov and the Centers for Medicare & Medicaid Services. Medicare premiums, deductibles, and program details change annually; verify current amounts at those sources or by calling 1-800-MEDICARE before making an enrollment decision.
Frequently Asked Questions
What are the four parts of Medicare?
How much does Medicare cost in 2026?
What happens if I miss my Medicare enrollment window?
Should I choose Original Medicare or Medicare Advantage?
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