What Is Medicare? Complete Guide to Parts A, B, C & D in 2026

Medicare is a federal health insurance program of individuals who are 65 years or older, and individuals who are under 65 years and have specific disabilities or end-stage renal disease. It covers about 67 million Americans as of 2026, according to CMS enrollment data, and is funded mostly by payroll taxes you've paid your whole working life. The most baffling aspect of the Medicare program is not whether you are eligible or not. It is knowing what each of the four parts includes, what they cost and how to assemble them.

The guide contains information about how Medicare works, what parts A, B, C, and D cover, what each part costs in 2026, and how to decide between Original Medicare and Medicare Advantage. This is based on the data published on Medicare.gov, CMS, and KFF. 

How does Medicare work?

Medicare basics start with the four parts. Each covers a different category of care, and you can mix and match coverage based on your situation.

Most people get Part A automatically when they turn 65 if they (or their spouse) worked at least 10 years paying Medicare tax. Part B is optional but strongly recommended. Without it, you'll pay full price for doctor visits and outpatient care.

You can either stay on Original Medicare (Parts A + B + optionally D + a Medigap supplement) or switch to Medicare Advantage (Part C, which bundles everything through a private insurer). The decision affects costs, provider networks, and added benefits.

What does Medicare Part A cover?

Part A is hospital insurance. Most people pay no monthly premium for it because they earned it through payroll taxes. The coverage includes:

• Inpatient hospital stays (semi-private room, meals, nursing care)

• Skilled nursing facility care (up to 100 days after a qualifying hospital stay)

• Hospice care

• Some home health care services

Part A has a deductible of $1,684 per benefit period in 2026, per the Medicare.gov 2026 cost summary. After day 60 of a hospital stay, daily coinsurance applies, and after day 90, it gets significantly higher. This is why most people pair Part A with a Medigap plan or Medicare Advantage to cover those gaps.

What does Medicare Part B cover?

Part B is a medical insurance of outpatient and physician services. The average monthly premium in 2026 is $185.00 to the majority of beneficiaries. The Income-Related Monthly Adjustment Amount (IRMAA) is applied to people with higher incomes.

Part B coverage includes doctor and specialist visits, outpatient care in a hospital, preventive care (annual wellness visit, vaccines, cancer screenings), durable medical equipment (wheelchairs, oxygen), mental health services, and limited prescription drugs administered by a provider.

Part B in 2026 will have an annual deductible of 257 and then, most covered services will require a coinsurance of 20%. No out of pocket maximum on original Medicare part B alone and that is why most people supplement with a Medigap plan or opt to subscribe to Medicare Advantage. To cover more details on the coverage, please refer to our Part B guide and Part B deductible breakdown.

Unless you have other qualifying coverage (such as a current employer plan), you will pay a permanent late enrollment penalty.

What is Medicare Part C (Medicare Advantage)?

Part C (Medicare Advantage) is another option to access your Medicare benefits. You sign up on a plan administered by a private insurance company that has been approved by Medicare instead of Original Medicare administered by the federal government. KFF data shows that approximately 54% of adults aged between 65 and 69 years old, who are eligible to obtain Medicare, now prefer Medicare Advantage to Original Medicare.

Medicare Advantage plans are required to cover all that Original Medicare covers (Parts A and B) and usually includes prescription drug coverage (Part D built in), dental, vision, and hearing benefits, wellness programs (gym memberships, telehealth) and an annual out-of-pocket maximum (a significant benefit over Original Medicare).

The trade-off: you are required to use the network of doctors and hospitals in the plan, and prior authorization is frequently required to have a procedure. Costs vary widely. There are plans with zero monthly premiums but increased copays, and there are also plans with higher monthly premiums of $50 to 200, but with better benefits. Our comparisons of AARP Medicare Advantage and Aetna Medicare Advantage include specific carrier comparisons, while Medicare Advantage in Texas has state-specific comparisons. 

What is Medicare Part D?

Part D Medicare is a cover that takes care of outpatient prescription drugs. It is not compulsory yet significant. In the absence of Part D, you would pay full retail on prescriptions which could cost thousands of dollars per year on common medications.

Part D plans are provided by privately owned insurers that are acceptable to Medicare. The plans each have their own formulary (covered drug list), monthly premium, deductible, and pharmacy network. Monthly premiums will average at about 45 in 2026 with a maximum deductibles of 545.

The largest modification was implemented in 2025 as part of the Inflation Reduction Act: a new out-of-pocket limit of Part D drugs, set at a new amount of 2,000 per year. This is the first hard cap on prescription costs in Medicare's history. After you have passed the threshold of spending $2,000 in out-of-pocket expenses during a calendar year, you have your prescriptions covered at $0 the remainder of the year.

With the help of Plan Finder on Medicare.gov, you can compare plans in relation to certain medications. 

How to choose between Original Medicare and Medicare Advantage

The choice between Original Medicare (with Medigap) and Medicare Advantage is the biggest decision new Medicare beneficiaries make. Here's the high-level comparison:

If you travel often, have chronic conditions, or want maximum provider flexibility, Original Medicare with Medigap (especially Plan G or Plan N) is usually the better choice. If you're healthy, want lower monthly costs, and don't mind a network, Medicare Advantage may save you money.

When to enroll in Medicare

Medicare for seniors has specific enrollment windows:

• Initial Enrollment Period: Starts 3 months before your 65th birthday and ends 3 months after (7 months total)

• General Enrollment Period: January 1 to March 31 each year (for people who missed Initial Enrollment)

• Annual Enrollment Period: October 15 to December 7 each year (for switching plans)

• Medicare Advantage Open Enrollment: January 1 to March 31 (for switching out of Medicare Advantage)

Missing your Initial Enrollment Period can trigger lifetime late penalties for Part B and Part D. If you're still working at 65 with employer coverage, talk to a Medicare broker before deciding when to enroll.