Protect
Medicare basics: Parts A, B, C, D explained (2026)
Medicare has four parts and two paths. Knowing the trade-offs before you turn 65 saves real money — and avoids permanent late-enrollment penalties.
Medicare is the federal health-insurance program for Americans 65 and over. It's made of four parts (A, B, C, D) that combine into two practical paths: Original Medicare + Medigap + Part D, or Medicare Advantage (Part C) all-in-one.
The decision you make at 65 is hard to reverse later (Medigap medical underwriting outside your one-time guaranteed-issue window), so it's worth understanding the trade-offs before you enroll.
The four parts in one minute
| Part | Covers | Premium (2025; 2026 TBA) |
|---|---|---|
| A | Hospital inpatient, skilled nursing, hospice | $0 if 10+ years of Medicare taxes paid |
| B | Outpatient, doctor visits, preventive, durable medical equipment | $185/month standard (2025); IRMAA above income thresholds |
| C (Advantage) | A + B + usually D + extras, via private plans | $0–$100+/month (in addition to Part B) |
| D | Prescription drugs | ~$35/month average national (2025); IRMAA above income thresholds |
2026 Part B premium and IRMAA brackets will be announced by CMS in fall 2025; verify at Medicare.gov before making decisions for 2026.
Part A — hospital insurance
- Premium: $0 for most people (if you or your spouse paid Medicare payroll taxes for 40 quarters / 10 years).
- 2025 inpatient deductible: $1,676 per benefit period.
- 2025 coinsurance: $0/day for days 1–60, $419/day for days 61–90, $838/day for lifetime reserve days, all costs beyond.
- Covers: inpatient hospital stays, skilled nursing facility (limited), home health (limited), hospice.
- Doesn't cover: long-term custodial care (that's long-term care insurance territory).
Part B — outpatient and medical insurance
- 2025 standard premium: $185/month (announced annually; 2026 figure TBA).
- 2025 annual deductible: $257.
- After deductible: you pay 20% coinsurance with no annual out-of-pocket cap on Original Medicare.
- Covers: doctor visits, lab work, outpatient surgery, preventive screenings, durable medical equipment.
- IRMAA surcharges apply for higher incomes (single $103K+, joint $206K+ approximate 2025 thresholds; 2026 TBA).
The 20% coinsurance with no cap is the catch
Original Medicare has no annual out-of-pocket maximum. A bad year — chemotherapy, surgery, extended rehab — can mean tens of thousands in 20% coinsurance. That's the reason most Original Medicare enrollees also buy a Medigap (supplement) policy.
Part C — Medicare Advantage
Private insurance plans that replace Original Medicare as your coverage delivery — they must cover everything A and B cover, and almost all bundle in Part D and extras like dental, vision, hearing, gym memberships.
- Premium: ranges from $0 to $100+/month (always paid in addition to Part B premium).
- Provider networks: HMO (in-network only except emergencies) or PPO (in/out-of-network with cost differential). NOT see-any-provider-nationally like Original Medicare.
- Out-of-pocket cap: ALL Advantage plans have an annual cap ($9,350 in-network for 2025; varies by plan). This is the main protection vs. Original Medicare.
- Prior authorization is more common in Advantage plans than Original Medicare. Some treatments require pre-approval.
- Region-specific. Different plans available in different counties; great plan in one zip code, mediocre in the next.
Part D — prescription drug coverage
Standalone prescription-drug plan (bought separately if you have Original Medicare, or bundled if you have Medicare Advantage).
- 2025 national base beneficiary premium: ~$36/month average.
- 2025 out-of-pocket cap: $2,000/year — major win for high-cost-drug patients (took effect 2025 under the Inflation Reduction Act).
- Formulary tiers: generics, preferred brand, non-preferred brand, specialty. Each tier has different cost-share.
- Late enrollment penalty: 1% of national base per month delayed, permanent.
Original Medicare + Medigap vs. Medicare Advantage
| Feature | Original + Medigap + Part D | Medicare Advantage |
|---|---|---|
| Provider network | Any provider that accepts Medicare (nationwide) | HMO/PPO network, often county-specific |
| Monthly premium | Part B + Medigap ($100–$300) + Part D (~$35) | Part B + Advantage plan ($0–$100+) |
| Annual out-of-pocket cap | ~$0 (Medigap fills the gap) but $2K for drugs | $9,350 in-network max (2025) |
| Prior authorization | Rare | Common, varies by plan |
| Extras (dental, vision) | Not included | Usually included |
| Best for | Travelers, snowbirds, complex medical needs | Stable in one region, healthy-ish, low premium priority |
The enrollment timeline
Initial Enrollment Period (IEP): 7 months total — 3 months before your 65th birthday month + your birthday month + 3 months after. Enroll in Parts A, B, D, and pick up Medigap or Advantage in this window. Medigap has guaranteed issue here — outside this window, insurers can decline you or charge based on health.
Annual Enrollment Period (AEP): October 15 – December 7 each year. You can switch Part D plans, switch Medicare Advantage plans, or move between Original Medicare and Advantage. Changes take effect January 1.
Medicare Advantage Open Enrollment: January 1 – March 31. You can switch from one Advantage plan to another, or drop Advantage and go back to Original Medicare (with one chance to add Part D).
If you're still working with employer coverage at 65: you can delay Part B enrollment without penalty as long as the employer plan is creditable coverage (employer with 20+ employees). When you leave that job, you get a Special Enrollment Period to sign up for Part B with no penalty.
The penalties for missing enrollment
- Part B late penalty: 10% of standard premium for each full 12-month period you delayed without creditable coverage. Permanent for life. Delay 5 years = 50% higher Part B premium forever.
- Part D late penalty: 1% of the national base beneficiary premium for each month you went without creditable drug coverage. Also permanent.
- Medigap medical underwriting outside your IEP. After your 6-month Medigap open-enrollment window (starting the month you turn 65 AND enroll in Part B), insurers can deny coverage or charge more based on pre-existing conditions in most states.
IRMAA — the high-income surcharge
Higher-income Medicare enrollees pay extra on Parts B and D premiums. The surcharge is determined from your tax return 2 years prior. For 2026 enrollees, your 2024 modified AGI determines whether you face IRMAA and at what tier.
Approximate 2025 thresholds (single filer): $103K (no IRMAA), $129K (+$70/mo), $161K (+$175/mo), $193K (+$280/mo), $500K (+$385/mo), $750K+ (+$420/mo). Roughly double for MFJ. 2026 figures will be announced in fall 2025.
Strategies to manage IRMAA
- Smooth Roth conversions in years 60–63 (before Medicare) to keep AGI under IRMAA cliffs once Medicare starts. See our Roth conversion ladder guide.
- Time large capital gains in low-income years to avoid bumping into IRMAA tiers.
- Watch the cliff structure — $1 over a threshold can cost hundreds in surcharges. IRMAA is a "cliff," not a marginal rate.
- File Form SSA-44 for a life-changing event (retirement, divorce, death of spouse) to ask SSA to use a more recent income year.
How to shop for Medigap or Advantage
The cleanest path is an independent broker who isn't paid to push one specific carrier. An insurance marketplace can also surface plans available in your zip:
For DIY shopping, the official Medicare Plan Finder at Medicare.gov/plan-compare lets you enter your prescriptions and see actual cost projections for each Part D and Advantage plan in your area.
The bottom line
If you travel, live in two states, or have complex medical needs: Original Medicare + Medigap + Part D is the more flexible path. Higher monthly cost, but you can see any provider nationally with essentially no out-of-pocket.
If you're rooted in one region and healthy-ish: Medicare Advantage is usually cheaper monthly, bundles extras, and has an out-of-pocket cap.
Always: enroll on time. The Part B and Part D late penalties are permanent — and the Medigap underwriting window closes 6 months after Part B starts. Don't sleep on enrollment.
Related reading
Frequently asked questions
- When do I become eligible for Medicare?
- Age 65 for most people — your Initial Enrollment Period is the 7-month window starting 3 months before your 65th birthday month and ending 3 months after. People under 65 qualify if they've received Social Security Disability Insurance (SSDI) for 24 months, or have ALS or end-stage renal disease.
- Is Medicare free?
- Part A (hospital) is premium-free for most enrollees who paid Medicare payroll taxes for 10+ years. Part B (outpatient) has a standard premium ($185/month in 2025; 2026 figure announced later in fall 2025 — verify at Medicare.gov). Higher-income enrollees pay an Income-Related Monthly Adjustment Amount (IRMAA) surcharge. Part D and Medicare Advantage premiums vary by plan and region.
- What's the difference between Original Medicare and Medicare Advantage?
- Original Medicare = Part A + Part B + (usually) a separate Part D drug plan + (usually) a Medigap supplement. You can see any provider that accepts Medicare nationally, with a 20% coinsurance and no out-of-pocket cap (Medigap fills that gap). Medicare Advantage = Part C, a bundled private plan that includes A/B/D and usually extras (dental, vision), but with HMO/PPO provider networks and an annual out-of-pocket cap built in.
- What happens if I miss my enrollment window?
- If you're not enrolled in Part B when you should be (and don't have qualifying employer coverage), you pay a permanent 10% premium penalty for each 12-month period you delayed. Part D has a similar permanent penalty (1% of national base premium per month delayed). Always enroll on time even if you don't need active coverage yet.
- Do I need Medigap if I have Medicare Advantage?
- No — and you can't have both. Medigap (Medicare Supplement) only works with Original Medicare (Parts A + B). It covers the 20% coinsurance and other cost-sharing Original Medicare leaves you with. Medicare Advantage already has its own out-of-pocket cap built in, so a Medigap policy would be redundant and isn't allowed.
- What is IRMAA?
- Income-Related Monthly Adjustment Amount — a surcharge on Part B and Part D premiums for higher-income beneficiaries. Determined from your tax return 2 years prior (so 2026 IRMAA is based on 2024 AGI). The thresholds for 2026 will be announced in fall 2025. Single filers above $103K (or so) and joint filers above $206K (or so) face IRMAA tiers ranging from $70 to $480+ extra per month per spouse.