Medicare: Parts A, B, C, and D Explained in Plain English

67.3 million people are enrolled in Medicare [1]. More than half of them (54%) have chosen a private Medicare Advantage plan over the government-run Original Medicare [2]. And a surprising number of them don't fully understand what they signed up for.

Medicare isn't one program. It's four overlapping parts with different costs, different coverage, and different enrollment rules. Miss a deadline and you'll pay a penalty for the rest of your life. Choose the wrong plan structure and you might owe twenty thousand dollars for a hospital stay you thought was covered.

This article explains what each part does, what it costs in 2026, and how the pieces fit together.

30-Second Summary: Medicare Part A covers hospitals (usually free). Part B covers doctors and outpatient care ($202.90/month in 2026). Part C (Medicare Advantage) bundles A and B through a private insurer, often adding drug coverage. Part D covers prescriptions. You must still pay the Part B premium even with Medicare Advantage, and you can't combine Advantage with Medigap.

Part A: Hospital Insurance

Part A covers inpatient hospital stays, skilled nursing facility care (limited), hospice, and some home health services [3].

Cost for most people: $0. If you or your spouse paid Medicare taxes for at least 10 years (40 work quarters), you pay no monthly premium for Part A. About 99% of beneficiaries qualify [4]. If you worked fewer than 30 quarters, the 2026 premium is $565 per month [4]. Between 30 and 39 quarters, it's $311.

But Part A isn't free when you use it. The 2026 inpatient hospital deductible is $1,736 per benefit period [4]. A "benefit period" starts when you're admitted and ends 60 days after you leave. Get readmitted after that gap? You pay the deductible again. You could theoretically pay it multiple times in one year.

Those per-day coinsurance amounts for extended stays are why Medigap insurance exists. A 75-day hospital stay under Part A would cost you $1,736 (deductible) + $6,510 (15 days × $434) = $8,246 out of pocket. Without supplemental coverage, a long hospitalization can be devastating.

Part B: Medical Insurance

Part B covers doctor visits, outpatient procedures, lab tests, MRIs, physical therapy, durable medical equipment, and preventive screenings [3].

2026 standard premium: $202.90 per month [4]. This is deducted directly from your Social Security check. The annual deductible is $283. After that, Medicare pays 80%, you pay 20%.

That 20% coinsurance has no cap.

Read that again. There is no out-of-pocket maximum on Part B. If you need $200,000 in outpatient cancer treatment, you owe $40,000 (after the deductible). This is the single biggest gap in Original Medicare, and it's why supplemental coverage matters so much.

Worked Example: Robert's Knee

Robert, 66, enrolled in Original Medicare with standard Part B. He injures his knee and needs an MRI, specialist visits, and physical therapy totaling $1,283 (Medicare-approved amount).

That's manageable. But if Robert's bill had been $100,000 for a major procedure? His 20% share would be roughly $20,000. This is not hypothetical. It happens every day.

Part C: Medicare Advantage

Medicare Advantage (MA) plans are offered by private insurers like UnitedHealthcare, Humana, and Aetna. They must cover everything Original Medicare covers. Most also include prescription drug coverage (Part D) and extras like dental, vision, and hearing [3].

Key difference from Original Medicare: MA plans have annual out-of-pocket maximums. In 2025, the in-network maximum was capped at $9,350 by CMS (the 2026 figure is subject to change but is typically in the same range). That means Robert's $100,000 bill would cost him roughly $9,000 to $9,350, not $20,000.

The tradeoff: MA plans use provider networks (HMO or PPO). See a doctor outside the network? You might pay the full cost. Original Medicare lets you see any doctor who accepts Medicare, nationwide.

Cost: Many MA plans have $0 monthly premiums (beyond the Part B premium you must still pay). Some charge $20 to $80 per month for richer benefits. But the $0 premium plans recover costs through copays, prior authorizations, and narrower networks.

54% of Medicare beneficiaries now choose Advantage plans [2]. The appeal is obvious: lower out-of-pocket risk, bundled coverage, often zero extra premium. The downside is less obvious until you need care outside your network or face a prior authorization denial for a procedure your doctor recommends.

Medicare Advantage vs. Original Medicare + Medigap

You cannot have both. Enrolling in Medicare Advantage means you leave Original Medicare. Medigap plans only work alongside Original Medicare.

If you value flexibility and can afford the Medigap premium, Original Medicare + Medigap + Part D gives you the broadest access with the lowest cost-sharing. If you want lower premiums and can live within a network, Medicare Advantage consolidates everything.

Part D: Prescription Drug Coverage

Part D covers outpatient prescription drugs through private plans. You can get standalone Part D with Original Medicare, or it's often bundled into a Medicare Advantage plan [3].

2026 base premium (national average): about $34.50 per month [5]. The national base beneficiary premium is $38.99 (used for penalty and IRMAA calculations), but actual plan premiums vary widely [5].

The big news for 2026: the annual out-of-pocket cap for Part D is $2,100 [6]. This is a major change from the Inflation Reduction Act. Previously, seniors could face $10,000+ in annual drug costs once they hit the catastrophic phase. Now, once you've spent $2,100 out of pocket on covered drugs, your costs drop to zero for the rest of the year.

This is genuinely huge for anyone taking expensive medications. The old "donut hole" coverage gap has been effectively replaced by a hard spending cap.

Enrollment: Don't Miss the Windows

Medicare enrollment has deadlines. Missing them costs real money, and I mean that literally: the penalties compound for life.

Initial Enrollment Period (IEP): 7-month window around your 65th birthday (3 months before, your birthday month, 3 months after). This is when you should enroll in Parts A and B. If you have employer coverage, you may be able to delay without penalty.

Late enrollment penalty (Part B): If you don't sign up when first eligible and don't have qualifying employer coverage, your Part B premium increases 10% for each 12-month period you were eligible but not enrolled. This penalty lasts for the rest of your life.

Late enrollment penalty (Part D): If you go 63+ days without Part D or equivalent coverage, you pay a penalty of 1% of the base premium ($38.99 in 2026) for each month you were uncovered. Also for life.

Open Enrollment (October 15 - December 7): Switch between Original Medicare and Medicare Advantage, change Advantage plans, or change Part D plans. This is your annual chance to optimize.

For anyone approaching 65, planning the enrollment timeline is just as important as choosing a plan. Missing it by a single month can add up to thousands of dollars in penalties over a lifetime. Our article on Medicare premiums covers the full cost picture, including IRMAA surcharges that catch high earners off guard.

Your Next Move

1. If you're turning 65 soon, mark your Initial Enrollment Period on the calendar. Contact Social Security three months before your birthday to start the process.

2. If you have employer coverage, verify whether it counts as "creditable coverage" for Medicare purposes. If it does, you can delay enrollment without penalty. Get it in writing.

3. Run the math on Medigap vs. Advantage. If you're healthy and budget-conscious, Advantage may be cheaper. If you travel, see specialists, or want zero cost-sharing surprises, Original Medicare + Medigap Plan G is worth the higher premium.

4. Check Part D plans annually during Open Enrollment. Drug formularies change every year. The plan that covered your medications cheaply in 2025 might not in 2026. Use Medicare.gov's plan finder tool.

5. Factor Medicare into your retirement budget. Between Part B premiums ($2,435/year), Part D, potential Medigap costs, and deductibles, a retired couple should budget $8,000 to $15,000 per year for Medicare-related expenses. Even before any major health events.

References

1. Forbes/CMS. (2024). Medicare Enrollment Statistics. As cited in CMS data for April 2024.
2. KFF (Kaiser Family Foundation). (2025). Medicare Advantage in 2025: Enrollment Update and Key Trends. KFF.org. https://www.kff.org/medicare/medicare-advantage-enrollment-update-and-key-trends/
3. Social Security Administration. (n.d.). Medicare Parts. SSA.gov. https://www.ssa.gov/medicare/plan/medicare-parts
4. Centers for Medicare & Medicaid Services (CMS). (2025). 2026 Medicare Parts A & B Premiums and Deductibles. CMS.gov. https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
5. Centers for Medicare & Medicaid Services (CMS). (2025). 2026 Medicare Part D Bid Information and Part D Premium Stabilization Demonstration Parameters. CMS.gov. https://www.cms.gov/newsroom/fact-sheets/2026-medicare-part-d-bid-information-and-part-d-premium-stabilization-demonstration-parameters
6. AARP. (2025). What's New in Medicare 2026. AARP.org. https://www.aarp.org/medicare/whats-new-in-medicare-2026/