Medicare Basics 2026: Parts A-D Explained

Medicare in 2026 consists of four main parts: Part A, Part B, Part C, and Part D. Approximately 64 million Americans rely on Medicare for their health coverage, which provides essential services ranging from hospital care to prescription drugs. Understanding these parts is crucial for maximising your benefits.

Understanding Medicare Parts A, B, C, and D

Medicare is divided into four main parts, each serving a distinct purpose. Here’s a detailed look at what each part covers.

Medicare Part A: Hospital Insurance

Medicare Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services.

• Inpatient Hospital Stays: Covers room, board, and necessary medical services during a hospital stay.
• Skilled Nursing Facility Care: Provides coverage for skilled nursing care after a hospital stay of at least three days.
• Hospice Care: Offers support for terminally ill patients, including pain relief and palliative care.
• Home Health Services: Covers part-time or intermittent home health care services, like physical therapy.

Medicare Part B: Medical Insurance

Medicare Part B covers outpatient care, preventive services, and some home health services.

• Outpatient Care: Includes doctor visits, outpatient hospital services, and certain medical equipment.
• Preventive Services: Offers screenings, vaccinations, and annual wellness visits to help maintain health.
• Mental Health Services: Covers outpatient mental health care, including counseling and psychotherapy.

Medicare Part C: Medicare Advantage

Medicare Advantage plans, or Part C, are offered by private insurance companies approved by Medicare. These plans combine coverage from both Part A and Part B, and often include additional benefits.

• Additional Benefits: Many Medicare Advantage plans offer vision, dental, and hearing coverage, which Original Medicare does not.
• Cost Structure: While you still pay your Part B premium, many plans have lower out-of-pocket costs and may include a cap on expenses.
• Network Restrictions: Most Medicare Advantage plans require you to use a network of doctors and hospitals.

Medicare Part D: Prescription Drug Coverage

Medicare Part D provides prescription drug coverage through private insurance companies. This part is essential for managing medication costs.

• Formulary: Each Part D plan has a list of covered drugs, known as a formulary. It’s crucial to check if your medications are included.
• Costs: Monthly premiums, deductibles, and co-pays vary by plan. The average monthly premium for Part D in 2023 was around $33.

Plan Type	Monthly Premium	Deductible	Average Co-pay
Original Medicare	$0 (Part A) + $185.00 (Part B)	$233 (Part B)	Varies by service
Medicare Advantage	$0 - $100	$0 - $500	$0 - $20
Part D	$33 (average)	$0 - $505	$5 - $50

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Costs and Premiums of Medicare Parts A, B, C, and D

Understanding the costs associated with each part of Medicare is essential for budgeting your healthcare expenses. Below is a breakdown of the premiums and costs for each part.

Medicare Part A Costs

• Premium: Most people do not pay a premium for Part A if they or their spouse paid Medicare taxes for at least 10 years.
• Deductible: In 2023, the deductible for Part A was $1,600 for each benefit period.
• Coinsurance: After 60 days in the hospital, you pay $400 per day for days 61-90, and $800 for days 91 and beyond.

Medicare Part B Costs

• Premium: The standard premium for Part B in 2023 was $185.00 per month, but it can be higher based on income.
• Deductible: The annual deductible for Part B was $233.
• Coinsurance: After meeting your deductible, you typically pay 20% of the Medicare-approved amount for most services.

Medicare Advantage Costs

• Premium: Varies widely, with many plans offering premiums as low as $0.
• Deductible: Can range from $0 to $500, depending on the plan.
• Out-of-Pocket Maximum: Plans are required to have an out-of-pocket maximum, which was capped at $8,300 for 2023.

Medicare Part D Costs

• Premium: Average monthly premium in 2023 was around $33.
• Deductible: Can be as high as $505, depending on the plan.
• Costs for Drugs: Varies based on the formulary and tier of the medication.

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Original Medicare vs. Medicare Advantage

Choosing between Original Medicare and Medicare Advantage can be a pivotal decision. Both have their pros and cons, and understanding these can help you make an informed choice.

Original Medicare

• Flexibility: You can see any doctor or specialist that accepts Medicare without needing a referral.
• No Network Restrictions: There are no network limitations, allowing for greater freedom in choosing healthcare providers.
• Separate Part D Plans: You will need to purchase a separate Part D plan for prescription drug coverage.

Medicare Advantage

• Cost-Effective: Many plans have lower premiums and out-of-pocket costs compared to Original Medicare.
• Additional Benefits: Often includes vision, dental, and wellness programs.
• Network Limitations: Requires you to use a network of providers, which can limit your options.

Feature	Original Medicare	Medicare Advantage
Flexibility	High	Moderate
Additional Benefits	No	Yes
Out-of-Pocket Maximum	No	Yes
Prescription Drug Coverage	Separate Part D plan	Often included

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Medigap Supplemental Plans

Medigap, or Medicare Supplement Insurance, helps cover some of the costs that Original Medicare does not, such as deductibles, coinsurance, and copayments.

Types of Medigap Plans

There are ten standardized Medigap plans (Plan A through Plan N) that offer different levels of coverage. Here’s a brief overview of some popular options:

• Plan F: Offers the most comprehensive coverage, covering all out-of-pocket costs.
• Plan G: Similar to Plan F but does not cover the Part B deductible.
• Plan N: Offers lower premiums but requires copayments for certain services.

Costs of Medigap Plans

• Premiums: Vary based on the plan and the insurance company, with average monthly premiums ranging from $100 to $300.
• Enrollment: The best time to enroll is during your Medigap Open Enrollment Period, which lasts for six months after you turn 65 and enroll in Part B.

Part D Prescription Drug Coverage

Part D is essential for managing prescription drug costs, and understanding how it works can save you money.

How Part D Works

• Formulary: Each plan has a formulary that lists covered medications. Check if your medications are included before enrolling.
• Tiers: Drugs are categorized into tiers, with lower tiers having lower co-pays. For example, Tier 1 might cost $10, while Tier 3 could cost $40.
• Coverage Gap: Known as the "donut hole," this is a temporary limit on what the drug plan will pay for covered drugs. In 2023, once you and your plan have spent $4,660, you enter the coverage gap. Note: The Inflation Reduction Act capped out-of-pocket drug costs at $2,000/year starting in 2025, effectively eliminating the donut hole for most beneficiaries.

Costs Associated with Part D

• Premiums: Average monthly premium is around $33.
• Deductibles: Can be as high as $505, depending on the plan.
• Co-pays: Varies based on the tier of the medication.

Enrollment Periods and Penalties

Understanding enrollment periods is crucial to avoid penalties and ensure you have coverage when you need it.

Initial Enrollment Period

• When: Begins three months before you turn 65 and ends three months after your birthday month.
• What to Do: Enroll in Parts A and B during this period to avoid penalties.

General Enrollment Period

• When: From January 1 to March 31 each year.
• What Happens: If you missed your Initial Enrollment Period, you can enroll in Parts A and B during this time.

Special Enrollment Periods

• When: Triggered by specific life events, such as moving or losing other health coverage.
• What to Do: You can enroll in Medicare during these times without facing penalties.

Penalties

• Part B Penalty: If you do not enroll when first eligible, you may incur a 10% penalty for each 12-month period you delay.
• Part D Penalty: A 1% penalty for each month you delay enrolling in a Part D plan after your Initial Enrollment Period.

How to Choose the Right Medicare Plan

Choosing the right Medicare plan involves evaluating your healthcare needs, budget, and preferences.

Assess Your Healthcare Needs

• Current Health Status: Consider your current health conditions and the frequency of doctor visits.
• Medications: List your prescriptions to ensure they are covered under the plan you choose.

Compare Costs

• Premiums and Deductibles: Look at the total costs, including premiums, deductibles, and out-of-pocket expenses.
• Out-of-Pocket Maximum: Consider plans that offer a cap on out-of-pocket expenses to protect against high costs.

Evaluate Provider Networks

• Preferred Doctors: Check if your preferred healthcare providers are in the plan’s network.
• Access to Specialists: Ensure you can easily access specialists if needed.

Review Additional Benefits

• Wellness Programs: Look for plans that offer additional benefits like gym memberships or wellness programs.
• Vision and Dental Coverage: Consider plans that include coverage for vision and dental services.

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Income-Related Surcharges (IRMAA)

Higher-income beneficiaries may be subject to income-related monthly adjustment amounts (IRMAA) for Parts B and D.

How IRMAA Works

• Thresholds: If your income exceeds $97,000 for individuals or $194,000 for couples, you may pay higher premiums.
• Additional Costs: The surcharge can add anywhere from $68.10 to $408.20 to your monthly premium for Part B, depending on your income bracket.

Planning for IRMAA

• Review Income: Regularly review your income to anticipate potential IRMAA charges.
• Tax Returns: IRMAA is based on your modified adjusted gross income from two years prior.

For more tips and comparisons, see our full guide to health insurance.

Conclusion

Navigating Medicare can be complex, but understanding the basics of Parts A, B, C, and D is crucial for making informed decisions about your healthcare coverage. By assessing your needs, comparing costs, and understanding the enrollment process, you can choose a plan that best fits your situation. Remember to consider supplemental options like Medigap and Part D for comprehensive coverage. Take the time to research and compare plans to ensure you have the best possible coverage for your health needs.