Fundamentals
Everything you need to understand how Medicare is structured — the parts, the enrollment rules, the costs, and the fundamental choice you'll need to make.
Medicare is organized into four main parts, each covering different types of healthcare services. Understanding what each part covers — and what it doesn't — is the foundation of every Medicare decision.
Part A
Covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. Most people don't pay a premium for Part A if they've worked and paid Medicare taxes for at least 10 years.
Part B
Covers outpatient care, doctor visits, preventive services, and durable medical equipment. Part B requires a monthly premium (which varies based on income) and a 20% coinsurance for most services after the deductible.
Part C
An alternative way to receive your Medicare benefits through a private insurance company. Combines Parts A and B, usually includes Part D, and often adds extra benefits. You still pay your Part B premium, plus any plan-specific premium.
Part D
Covers prescription medications. Under Original Medicare, you add a standalone Part D plan. Under Medicare Advantage, drug coverage is usually built in. Plans vary significantly by drug formulary, premiums, and cost-sharing.
Medicare has specific enrollment windows. Missing them can result in late enrollment penalties that last for life — or gaps in coverage. Understanding these windows is essential.
Initial Enrollment Period (IEP): A 7-month window around your 65th birthday — the 3 months before, the month of, and the 3 months after your birthday. This is when most people enroll for the first time. When within this window you sign up affects your coverage start date.
Special Enrollment Period (SEP): If you're still working at 65 and covered by employer insurance, you may qualify for a Special Enrollment Period when that coverage ends. This allows you to enroll without penalty after your IEP — but the rules have specific requirements and documentation needs.
Annual Enrollment Period (AEP): October 15 – December 7 each year. This is when you can switch Medicare Advantage plans, switch from Medicare Advantage to Original Medicare, or change your Part D drug plan. Coverage begins January 1 of the following year.
General Enrollment Period (GEP): January 1 – March 31 each year. Available to people who missed their IEP and don't qualify for a SEP. Late enrollment penalties typically apply.
Medicare's late enrollment penalties are permanent — they increase your premiums for as long as you're enrolled in Medicare. This is one of the most critical things to understand before missing a deadline.
Part B Penalty: 10% added to your monthly Part B premium for each full 12-month period you were eligible but didn't enroll. This penalty is permanent and applies for as long as you have Part B.
Part D Penalty: 1% of the national base beneficiary premium for each full month you went without creditable drug coverage. Also permanent.
Part A Penalty: If you have to pay a premium for Part A (a smaller group of people), missing enrollment can result in a 10% premium increase for twice the number of years you delayed.
"The penalty for late enrollment in Part B is permanent. It follows you for the rest of your life on Medicare."
Medigap (also called Medicare Supplement insurance) is private insurance designed to fill in the cost gaps of Original Medicare. With Original Medicare alone, you're exposed to significant out-of-pocket costs — hospital deductibles, the 20% Part B coinsurance, and no out-of-pocket maximum. Medigap policies cover most or all of these gaps, depending on the plan you choose.
Medigap plans are standardized by the federal government — Plans A through N each cover a defined set of benefits regardless of which insurance company sells them. The key differentiator between companies is price and customer service, not the benefits themselves (for the same plan letter).
The best time to buy Medigap is during your Medigap Open Enrollment Period — the 6-month window beginning the month you're both 65 and enrolled in Part B. During this window, insurers cannot use medical underwriting — they must sell you any plan they offer at standard rates, regardless of your health status.
Outside this window, in most states, insurers can require medical underwriting and may reject you or charge higher premiums based on health conditions. This is one of the key reasons the initial timing decision matters so much.
Medicare Advantage plans (Part C) are offered by private insurers as an alternative to Original Medicare. They must cover at least the same benefits as Parts A and B, but they deliver those benefits through a network-based managed care structure — typically HMO or PPO arrangements.
Medicare Advantage plans often have lower (or even $0) monthly premiums compared to Original Medicare + Medigap, and frequently include additional benefits like dental, vision, and hearing coverage. However, these plans typically require you to use in-network providers, get referrals for specialists, and obtain prior authorizations for many procedures and treatments.
Plan availability varies significantly by location — urban areas typically have many plan options, while rural areas may have few or none. Plan benefits and networks can change significantly each year during the Annual Enrollment Period.
→ Read the Deep Dive: When Medicare Advantage Makes SenseIf your income exceeds certain thresholds, you'll pay higher Part B and Part D premiums. This is called IRMAA — the Income-Related Monthly Adjustment Amount. It applies regardless of whether you're on Original Medicare or Medicare Advantage.
IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years prior. So your 2026 Medicare premiums are based on your 2024 tax return. Income thresholds and surcharge amounts are adjusted annually by CMS.
If you've had a significant income reduction since the tax return Medicare is using (retirement, loss of spouse, etc.), you can request that Social Security use a more recent income figure by filing an IRMAA appeal.
The Decision Brief walks through the five-dimension framework in full — free download.