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Medicare looks complicated from the outside because it is split into four parts with letters for names. The structure is simpler than it seems. Part A covers hospital stays. Part B covers doctor visits and outpatient care. Part D covers prescription drugs. Part C is a private-plan alternative that rolls A and B (and usually D) into one package. That is the whole system in one paragraph. Everything else is detail about costs, enrollment, and how the parts fit together, which is what the rest of this guide covers.
Part A: hospital insurance
Part A covers inpatient hospital care, stays in skilled nursing facilities, hospice care, and some home health care. Most people do not pay a monthly premium for Part A. If you or your spouse paid Medicare taxes for at least 40 quarters (about 10 years of work), Part A is premium-free. About 99 percent of beneficiaries qualify for this, according to CMS.
If you do not have enough work history, you can buy Part A. In 2026, the full monthly premium is $565. People with 30 to 39 quarters of coverage pay a reduced premium of $311 per month.
Part A has a deductible rather than an annual one like most insurance. The hospital deductible is $1,736 per benefit period in 2026, and it covers your share of the first 60 days of inpatient care. A benefit period starts the day you are admitted and ends after you have been out of the hospital for 60 days in a row. If you are admitted again after a new benefit period begins, you owe the deductible again.
After 60 days, coinsurance kicks in: $434 per day for days 61 through 90 of a hospital stay, and $868 per day for lifetime reserve days. For skilled nursing facility care, the first 20 days are free and days 21 through 100 cost $217 per day in 2026.
Part B: medical insurance
Part B covers doctor visits, outpatient care, preventive services, lab tests, durable medical equipment, and most mental health outpatient services. Almost everyone pays a premium for Part B. The standard monthly premium is $202.90 in 2026, and the annual deductible is $283.
After you meet the deductible, Original Medicare typically pays 80 percent of the approved amount for covered services and you pay 20 percent. There is no annual out-of-pocket maximum in Original Medicare, which is the gap that Medigap and Medicare Advantage plans exist to fill.
Higher-income beneficiaries pay more. If your modified adjusted gross income from two years ago is above $109,000 as a single filer or $218,000 as a joint filer, an income-related surcharge (called IRMAA) is added to your Part B premium. The surcharges range up to $689.90 per month total for the highest income bracket in 2026.
Part D: prescription drug coverage
Part D covers prescription drugs and is sold by private insurers approved by Medicare. Every Part D plan has a formulary, which is the list of drugs it covers and the tier each drug sits on. Lower tiers mean lower copays; specialty drugs sit on the highest tiers.
Part D plans have their own monthly premiums, which vary by plan and area. Most people enroll when they first become eligible for Medicare. If you go without creditable drug coverage for 63 days or more after your initial enrollment period, a late enrollment penalty is added to your Part D premium permanently, for as long as you have the coverage.
If you choose a Medicare Advantage plan that includes drug coverage (most do), you do not need a separate Part D plan. You cannot have both a stand-alone Part D plan and a Medicare Advantage drug plan at the same time.
Part C: Medicare Advantage, the private alternative
Part C is not a separate benefit. It is the legal name for Medicare Advantage, private plans that contract with Medicare to deliver your Part A and Part B benefits. These plans must cover everything Original Medicare covers, and most add extras like dental, vision, hearing, gym memberships, and prescription drug coverage.
Medicare Advantage plans typically have lower premiums than the combination of Part B plus Medigap plus Part D, but they come with networks. You generally need to use the plan’s doctors and hospitals, and many plans require referrals for specialists. They also set their own cost-sharing rules within Medicare’s limits, and they do set an annual out-of-pocket maximum, which Original Medicare does not.
About half of Medicare beneficiaries are now in Medicare Advantage plans, and the other half stay in Original Medicare. Neither choice is right for everyone. The tradeoff is between predictable costs and provider flexibility, which is covered in detail in our Medicare Advantage vs Medigap guide.
How the parts fit together: your three main options
Once you are enrolled in Parts A and B, you pick one of three paths.
Option one: Original Medicare plus a Medigap policy plus a stand-alone Part D plan. You get nationwide access to any doctor who takes Medicare, no referrals, and the Medigap policy covers most or all of the 20 percent coinsurance. You pay three premiums: Part B, Medigap, and Part D.
Option two: a Medicare Advantage plan. One plan, one set of rules, usually one premium on top of your Part B premium, and often drug coverage included. Your care runs through a network.
Option three: Original Medicare alone. This is the default if you do nothing else. It works, but the 20 percent coinsurance has no cap, so one bad year can get expensive.
When to enroll
Your initial enrollment period runs for seven months: the three months before you turn 65, your birthday month, and the three months after. Enrolling in Part A and Part B during this window avoids late penalties. If you miss it, the general enrollment period runs January 1 through March 31 each year, and coverage starts July 1, with a possible late enrollment penalty on Part B.
If you are still working at 65 and have health coverage through your (or your spouse’s) current employer, you can usually delay Part B without penalty. You get a special enrollment period when that employment or coverage ends. Check the open enrollment deadlines guide for the current year’s dates and what happens if you miss them.
The bottom line on costs
At a minimum, budget for the Part B premium of $202.90 per month in 2026, plus whatever you choose for drug coverage and gap protection. Most beneficiaries also pay a Medigap premium, a Medicare Advantage premium, or a stand-alone Part D premium on top of that. Dental, vision, and hearing are the most common surprises, since Original Medicare covers almost none of them, so factor those into your plan choice from the start.
