Medicare in Plain Language

Here's the structural reality of Medicare: a federal program built in four parts, each governing a different slice of care, each with its own rules and costs. A person on Medicare is rarely on just one part — most beneficiaries combine pieces to fit how they use medical care. Jason Chad Baar, a Fee-Only Medicare Advisor, wrote this primer to lay out what each part is, what it costs in 2026, and how the major coverage paths fit together. The page is national in scope and factual in tone, for a beneficiary mapping the territory before talking to anyone about a specific plan.

On this page:

Part A — Hospital Insurance

Part A is the hospital-insurance half of Original Medicare. It helps pay for inpatient hospital stays, skilled nursing facility care after a qualifying hospital stay, hospice care, and limited home health services. Most U.S. residents become eligible at age 65, and roughly 99% pay no Part A premium because they (or a spouse) have 40 or more quarters of Medicare-taxed work history (per CMS). Part A cost-sharing is measured in benefit periods — a span starting on hospital admission and ending after 60 consecutive days without inpatient care. In 2026, the inpatient hospital deductible is $1,736 per benefit period (per CMS, 2026). Days 61–90 carry $434/day coinsurance, and days 91+ (lifetime reserve days) cost $868/day. Skilled nursing facility days 21–100 are $217/day. Original Medicare alone has no annual out-of-pocket cap.

Part B — Medical Insurance

Part B is the medical-insurance half of Original Medicare. It covers medically necessary outpatient care: doctor visits, preventive services, outpatient mental health, lab and diagnostic testing, ambulance transport, and durable medical equipment (DME) — items such as wheelchairs, walkers, and oxygen. The 2026 standard monthly premium is $202.90, and the annual deductible is $283 (per CMS, 2026). After the deductible, the beneficiary generally pays 20% coinsurance on covered services. About 8% of beneficiaries pay an IRMAA surcharge — an additional Part B premium for higher-income beneficiaries based on tax-return income from two years prior — which in 2026 begins above $109,000 modified adjusted gross income for single filers and $218,000 for married filing jointly (per SSA, 2026). The Part B late enrollment penalty adds 10% to the premium for each full 12-month delay, lifetime.

Part C — Medicare Advantage

Part C, also called Medicare Advantage, is a private-insurer alternative delivering Part A and Part B benefits — usually bundled with Part D — through a single plan. The beneficiary still owes the Part B premium directly to Medicare. The two dominant plan types are HMOs (in-network care only, often with a primary-care referral for specialists) and PPOs (out-of-network care at higher cost-sharing). In 2026, 57% of MA plans are HMOs and 43% PPOs (per KFF, 2026). The 2026 federal in-network MOOP — maximum out-of-pocket, the annual cap on covered services — is $9,250, with a combined PPO MOOP of $13,900. The 2026 average premium is $14.00/month, and 67% of MA-PD plans — Medicare Advantage plans that include Part D drug coverage — carry $0 plan premium (per KFF, 2026). MA terms can change every January 1; carriers must send an Annual Notice of Change (ANOC) by September 30. MA plans often include extras Original Medicare doesn't, such as routine dental, vision, and hearing.

Part D — Prescription Drug Coverage

Part D is voluntary federal prescription drug coverage delivered by Medicare-approved private insurers. Two ways to get it: a standalone PDP — Prescription Drug Plan — attached to Original Medicare, or bundled inside an MA-PD. Each plan publishes its own formulary — the list of drugs covered and at what cost — usually tiered from preferred generic up to specialty. In 2026, annual out-of-pocket on covered Part D drugs is capped at $2,100; once reached, covered drugs cost $0 for the rest of the year (per CMS, 2026). No 2026 Part D plan may set a deductible higher than $615. The Medicare Prescription Payment Plan (MPPP) — the smoothing option — lets a beneficiary pay $0 at the pharmacy and receive monthly bills from the plan; it changes timing only, not total cost. The Part D late enrollment penalty is 1% of the national base beneficiary premium ($38.99 in 2026, per Medicare.gov) times full uncovered months, lifetime. Formularies can change each January 1; plans must send an Annual Notice of Change (ANOC) by September 30.

Medicare Advantage vs. Medigap

The structural fact: Medicare Advantage replaces Original Medicare A+B by routing those benefits through a private plan, while Medigap (Medicare Supplement) supplements Original Medicare A+B by paying some of the deductibles, coinsurance, and copayments it leaves behind. A beneficiary can't hold both (per CMS).

On monthly cost, MA usually costs less — many plans charge $0 plan premium on top of the standard Part B premium — while Medigap adds a separate, typically higher premium. On provider freedom, MA uses networks (HMO or PPO); Medigap has no networks and works with any U.S. provider who accepts Medicare. On out-of-pocket exposure, MA caps in-network spending at the federal MOOP yearly; Medigap closes gaps Original Medicare leaves on Parts A and B. On plan stability, MA terms can change every January 1; Medigap is federally standardized — the same letter (for example, Plan G) carries identical benefits across carriers, with only premium and underwriting differing (per Medicare.gov). On drug coverage, MA usually bundles Part D; Medigap policies sold today don't, so Medigap beneficiaries typically enroll in a standalone Part D plan.

Two federal windows matter for crossing between paths. The Initial Medigap Open Enrollment Period is a one-time, 6-month window starting the first month a beneficiary is age 65 or older AND enrolled in Part B; during it, carriers cannot deny coverage or charge more for health history. The federal MA trial right runs 12 months from when a beneficiary first joins MA at age 65, allowing a switch back to Original Medicare plus Medigap with no health questions (per Medicare.gov).

How Medicare Varies by County

Original Medicare benefits are nationally uniform — the same services covered regardless of where a beneficiary lives — and Medigap is federally standardized. Variation lives almost entirely on the Medicare Advantage side, with some regional Part D variation.

The mechanism: CMS sets a county-level benchmark payment rate that determines what the federal government pays an MA plan to cover an average enrollee there. Each carrier bids county by county, deciding whether to offer plans, what premiums and benefits to file, and which local providers to bring in-network. Because contracts are county-specific, a carrier may offer a robust plan menu in one county and nothing in the next.

The result: plan menus, networks, premiums, copays, and supplemental benefits — dental, vision, hearing, over-the-counter allowances, transportation — differ markedly between neighboring counties. A doctor in-network in one county may be out-of-network across the line. MA penetration — the share of beneficiaries enrolled in MA rather than Original Medicare — varies widely county-by-county (per KFF, 2026). Even a short move can change the plan landscape.

Enrollment Periods for Part C and Part D

Four enrollment periods govern when a beneficiary can join, change, or drop Part C and Part D coverage.

The IEP (Initial Enrollment Period) is a 7-month window tied to the 65th birthday — three months before, the birthday month, and three months after. It applies to Parts A, B, C, and D (per Medicare.gov).

The AEP (Annual Election Period) runs October 15 through December 7. During AEP, a beneficiary can join, switch, or drop a Part C plan or a standalone Part D plan; changes take effect January 1.

The MA-OEP (Medicare Advantage Open Enrollment Period) runs January 1 through March 31. Available only to a beneficiary enrolled in an MA plan as of January 1, it allows one election: switch MA plans, or drop MA and return to Original Medicare (with the option to add a standalone Part D plan). MA-OEP can't move a beneficiary from Original Medicare into MA (per CMS).

A SEP (Special Enrollment Period) is triggered by a qualifying event — moving out of a plan's service area, losing employer or other creditable coverage, a plan contract terminating, gaining or losing dual-eligibility status, and others. Each SEP has its own time limit.

Two late enrollment penalties stay attached to the monthly premium as long as the beneficiary keeps coverage. The Part D LEP (late enrollment penalty) is 1% of the national base beneficiary premium ($38.99 in 2026) times full uncovered months, lifetime. The Part B LEP — relevant because Part C requires Part B — adds 10% to the Part B premium for each full 12-month delay, lifetime (per Medicare.gov).