Medicare: The Four Parts, Enrollment and Premiums

Medicare is the federal health insurance most people join at 65, and it is not one program but four parts with different rules, costs and deadlines. Two decisions made around 65, when to enroll and whether to pair Original Medicare with a supplement or choose a Medicare Advantage plan, shape your costs and choice of doctors for years. Some mistakes, such as a missed enrollment window, carry penalties that last for life. This chapter explains each part, the enrollment windows and penalties, the main coverage choice, and the income-related premiums that connect Medicare to the tax decisions in earlier chapters.

The four parts

Part A, hospital insurance. Covers inpatient hospital stays, a limited amount of skilled nursing facility care after a qualifying hospital stay of at least three days as an inpatient, hospice, and some home health care. Most people pay no premium for Part A because they, or a spouse, have 40 credits of work in which they paid Medicare tax. There is a deductible for each benefit period and daily coinsurance for long stays.

Part B, medical insurance. Covers doctors' services, outpatient care, preventive care, lab tests, durable medical equipment and ambulance services. Everyone pays a monthly premium: the standard Part B premium for 2026 is about $203 a month, and it is higher at higher incomes (see below). After a yearly deductible you generally pay 20% of the Medicare-approved amount, and Original Medicare has no yearly cap on what you can pay out of pocket. That missing cap is the main reason most people add something to it.

Part C, Medicare Advantage. Private plans approved by Medicare that replace Parts A and B for you. They must cover what A and B cover, usually include drug coverage, and must set a yearly out-of-pocket maximum. In exchange they typically use networks of doctors and hospitals and often require prior authorization for some services. Many add dental, vision or hearing benefits.

Part D, prescription drugs. Drug plans sold by private insurers, either on their own (alongside Original Medicare) or built into a Medicare Advantage plan. Since 2025 there has been a yearly cap on what you pay out of pocket for covered drugs, and the old "coverage gap" is gone. The cap is indexed each year; medicare.gov lists the current figure. Plans change their drug lists and prices every year, so a plan that suited you last year may not this year.

What Medicare generally does not cover: most dental care, routine eye exams and glasses, hearing aids, care outside the United States, and long-term custodial care, the help with daily activities covered in the next chapter.

When to enroll, and the penalties for missing it

If you already receive Social Security when you turn 65, you are enrolled in Parts A and B automatically. Otherwise you sign up yourself.

The initial enrollment period is seven months: the three months before the month you turn 65, that month, and the three months after. Signing up in the months before your birthday month means coverage starts on the first day of your birthday month.

If you are still working, and you have group health coverage through your own or your spouse's current job, you can usually delay Part B without a penalty. When that job or the coverage ends, whichever comes first, you get an eight-month special enrollment period to sign up for Part B. For employers with fewer than 20 employees, Medicare often has to pay first, so delaying Part B can leave you with little coverage; check with the employer's plan.

COBRA and retiree coverage do not count as coverage from current employment. Someone who leaves work at 66, takes COBRA and only signs up for Part B when COBRA runs out can owe a lifetime penalty and face a gap in coverage. The eight-month window runs from the end of employment, not from the end of COBRA.

If you miss your windows, you can sign up during the general enrollment period from January 1 to March 31 each year, with coverage starting the month after you sign up. The penalties:

• Part B: your premium goes up 10% for each full 12-month period you could have had Part B but did not, for as long as you have Part B.
• Part D: if you go 63 days or more without Part D or other creditable drug coverage after your initial enrollment period, a penalty of 1% of the national base premium for each month without coverage is added to your Part D premium for as long as you have it.

If you contribute to an HSA, remember that enrolling in any part of Medicare ends your eligibility to contribute (the HSA chapter covers the six-month look-back).

Original Medicare with a supplement, or Medicare Advantage

This is the choice with the longest-lasting consequences.

Original Medicare plus Medigap. A Medigap (Medicare supplement) policy pays some or all of the deductibles and the 20% coinsurance that Original Medicare leaves to you. Policies are standardized by letter, so a given letter covers the same benefits from every insurer and only the price differs. You add a separate Part D plan for drugs. You can see any doctor or hospital in the country that accepts Medicare, without referrals. The cost is a higher monthly premium for the Medigap policy on top of Part B and Part D.

Medicare Advantage. Often a low or zero extra premium beyond Part B, drug coverage included, a cap on yearly out-of-pocket costs and frequently extra benefits. The trade-offs are networks, prior authorization, and plan terms that can change each year.

The timing rule that matters most: your Medigap open enrollment period is six months, starting the first month you are both 65 or older and enrolled in Part B. During it, an insurer must sell you any Medigap policy it offers at its standard price, whatever your health. After it, in most states insurers can ask health questions and charge more or refuse. So someone who starts with Medicare Advantage and later wants to switch to Original Medicare with a supplement may not be able to buy one at a fair price. Some states give stronger rights; there is also a limited trial right if you join an Advantage plan when first eligible and leave within the first year.

People who travel a lot, split the year between states, or want a specific specialist or hospital often lean toward Original Medicare with Medigap. People who are comfortable with a local network and want lower premiums often lean toward Advantage. Each autumn, from October 15 to December 7, you can change Advantage and Part D plans for the next year.

Income-related premiums (IRMAA)

Higher-income enrollees pay more for Parts B and D. The extra charge, the income-related monthly adjustment amount, is based on your modified adjusted gross income (adjusted gross income plus tax-exempt interest) from the tax return two years earlier. For 2026 it begins above $218,000 for a joint return and above $109,000 for single filers, and rises in steps from there. Each step is a cliff: going one dollar over a line adds the full amount for that step for the year.

Two practical points follow. Because of the two-year look-back, a large Roth conversion, a business sale or a big capital gain at 63 can raise your premiums at 65, so the Roth conversion calculator shows the Medicare effect alongside the tax. And if your income dropped because of a life-changing event, such as retiring, stopping or reducing work, marriage, divorce or a spouse's death, you can ask Social Security to use a more recent year with form SSA-44.

People with limited income and savings may qualify for Medicare Savings Programs, which help with premiums, and for Extra Help with drug costs. The State Health Insurance Assistance Program in every state gives free, unbiased Medicare counseling.

YOUR NEXT STEPSDo this now

1. Put your initial enrollment period on your calendar: the three months before the month you turn 65 through the three months after.
2. If you will still be working at 65, ask your employer's plan whether it pays first or second once you are eligible for Medicare, and whether the employer has 20 or more employees.
3. If you plan to use Medigap, mark the six-month Medigap open enrollment window that starts when your Part B begins.
4. Check your income two years before 65 against the Medicare premium lines, using the Roth conversion calculator if you are planning a conversion that year.
5. Each autumn, compare your Part D or Advantage plan against your current prescriptions using the plan finder at medicare.gov.