The complete guide
How Medicare actually works: four parts, two paths, one decision
Short answer: Medicare is four parts that combine into two paths. Part A covers hospitals, Part B covers doctors and outpatient care, and together they are called Original Medicare. From there you choose one of two directions: keep Original Medicare and add a Medigap supplement plus a Part D drug plan, or replace the whole thing with a Medicare Advantage plan (Part C), which bundles everything into one private plan with a network. That choice, made once around your 65th birthday, is the decision this entire program asks of you. Here is how every piece works and how the two paths actually differ.
Key takeaways
- Part A covers inpatient hospital care, Part B covers doctors and outpatient care; together they are Original Medicare.
- Part C (Medicare Advantage) is a private alternative that replaces A and B and usually includes drug coverage.
- Part D covers prescriptions, either as a standalone plan or built into an Advantage plan.
- Original Medicare has no annual out-of-pocket limit, which is why most people add a Medigap policy or choose Advantage.
- Your enrollment window is the seven months around your 65th birthday, and missing it can mean permanent penalties.
The four parts, in plain English
| Part | What it covers | What it costs in 2026 |
|---|---|---|
| Part A | Inpatient hospital stays, skilled nursing after a hospital stay, hospice, some home health | Usually $0 premium with ~10 years of work history; $1,736 deductible per benefit period |
| Part B | Doctor visits, outpatient care, labs, imaging, equipment, preventive services | $202.90 a month, $283 annual deductible, then you pay 20% with no annual cap |
| Part C | Medicare Advantage: a private plan that delivers A and B, usually with drugs and extras | The Part B premium plus the plan premium (often $0), with copays up to the plan maximum |
| Part D | Prescription drugs, through private plans | Varies by plan; in 2026 the deductible is capped at $615 and your out-of-pocket at $2,100 |
2026 figures from CMS. The 2027 Part B premium had not been announced as of October 12, 2026; Medicare Trustees project roughly $209.50, which is a projection rather than an official amount.
Two things in that table do most of the damage to people’s finances. First, Part A’s deductible is charged per benefit period, not per year, so two separated hospital stays in one year mean paying it twice (how benefit periods work). Second, Part B’s 20% coinsurance has no annual maximum. For a routine year that is unremarkable. For a year with cancer treatment, dialysis, or major surgery, 20% of a very large number is still a very large number, which is the single most important fact in this article.
The two paths, which is the real decision
| Original Medicare + Medigap + Part D | Medicare Advantage (Part C) | |
|---|---|---|
| Doctors | Any provider in the U.S. who accepts Medicare, no referrals | A network, usually local; out-of-network costs more or is not covered |
| Cost structure | Higher fixed premiums, very predictable bills | Lower or $0 premium, copays as you go, capped by an out-of-pocket maximum |
| Annual limit on your costs | None from Medicare, but Medigap pays the gaps | A hard out-of-pocket maximum, commonly several thousand dollars |
| Drugs | A separate Part D plan you choose | Usually bundled into the plan |
| Extras | None; Medicare covers medical care only | Often dental, vision, hearing, fitness, OTC allowances |
| Approvals | Prior authorization is rare | Prior authorization is common for imaging, surgery, and facility stays |
| Travel | Works anywhere in the U.S. | Emergencies covered anywhere; routine care generally in-network only |
Neither path is better in general. The honest comparison is in our Advantage versus Original Medicare article; the right answer depends on your doctors, your drugs, your travel, and your tolerance for approval processes.
The deeper comparisons live in Advantage versus Original Medicare, the Medigap guide, and the Advantage guide. One asymmetry is worth knowing before you choose: starting on Advantage and switching to Medigap later usually requires passing medical underwriting, while starting on Medigap and switching to Advantage later is generally easy. The doors do not swing equally in both directions, which is covered in the one-way-door article.
What Medicare actually costs
For a typical person in 2026 on Original Medicare: $202.90 a month for Part B, $100 to $300 for a Medigap policy depending on state, age, and plan letter, and $0 to $60 for a Part D plan. Higher earners pay an income surcharge called IRMAA, which begins above $109,000 single or $218,000 joint and is based on your tax return from two years earlier. On Medicare Advantage, many plans carry a $0 premium on top of Part B, trading predictable premiums for copays when you use care. Full figures for everything are in the costs guide and the numbers card.
If money is tight, two programs matter more than any plan choice: Medicare Savings Programs can pay your Part B premium outright, and Extra Help cuts drug costs to a few dollars. Both are widely unclaimed.
When to enroll, and the penalties for not
Your Initial Enrollment Period is seven months: the three months before your 65th birthday month, that month, and the three after. Enroll before your birthday month and coverage starts the first of your birthday month; enroll during or after and it starts the first of the following month (every start date).
Two penalties are permanent and both are avoidable. Part B: 10% added for every 12 months you went without it, for life. Part D: 1% of the national base premium per uncovered month, for life. The exception is creditable coverage from an employer, which legitimately lets you delay (working past 65). COBRA and retiree coverage do not count for Part B, which is the most expensive misunderstanding in the program. The penalty math, worked out.
How to actually choose
- List your must-keep doctors. If they are not in an Advantage network you would consider, that narrows things immediately.
- List your prescriptions exactly. Then price them on the official Plan Finder, sorted by total annual cost rather than premium.
- Decide how you want to pay. Higher fixed premiums with very few surprises (Medigap), or lower premiums with copays and an annual ceiling (Advantage).
- Consider travel and second homes. Original Medicare travels anywhere in the country; Advantage networks are local.
- Mind the timing. Your Medigap window is six months from when Part B starts, and it never comes back.
If you would rather answer questions than read comparisons, the nine-question decoder runs your situation against the actual rules and gives you a path with reasoning, free. Already on Medicare and wondering whether to switch this fall? The re-shop checker takes a minute.
Questions people also ask
What are the four parts of Medicare?
What is the difference between Original Medicare and Medicare Advantage?
How much does Medicare cost per month in 2026?
Do I need Part D if I take no medications?
When should I sign up for Medicare?
Sources for this article
- Medicare.govMedicare.gov: how Parts A, B, C, and D work, enrollment, and coverage rules.
- CMS.gov2026 Medicare Parts A and B premiums and deductibles: every 2026 cost figure cited here.
- CMS.gov2027 Medicare Advantage and Part D landscape: 2027 plan pricing projections.
Figures checked against these sources on October 12, 2026. We update within days when CMS publishes new amounts.
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- Your enrollment dates calculated from your own birthday, with the penalty deadlines marked
- Advantage vs. Medigap scored against your doctors, drugs, travel, and budget
- Word-for-word scripts for the broker, HR, the pharmacy, and Social Security
- The September re-shop ritual you reuse every fall, with the 2026 and 2027 numbers card
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