Medicare is a federal health insurance program for people 65 and older, some younger people with disabilities, and people with end-stage renal disease

Medicare is run by the Centers for Medicare & Medicaid Services (CMS), a division of the U.S. Department of Health and Human Services. You do not buy Medicare directly from a private company — instead, you enroll through Social Security, and the federal government funds it through payroll taxes and your monthly premiums. The program is divided into four parts, each covering different types of care, and you choose which parts you want based on your health needs and how you want to receive care.

Understanding how Medicare works means learning what each part covers, how much you pay, and when you can sign up. Most people become may be able to access at 65, but the rules about timing and costs change depending on your work history and income. This guide explains the structure so you can understand your options.

Key Takeaways

  • Medicare has four parts: Part A covers hospital stays, Part B covers doctor visits and outpatient care, Part D covers prescription drugs, and Part C is an alternative way to receive all benefits through a private insurance plan.
  • You pay different amounts for each part — some have no monthly premium, others do, and all have deductibles and copayments that vary by the service you use.
  • Most people enroll at 65, but you can enroll earlier if you have a disability or end-stage renal disease, and you can change your coverage each year during the annual enrollment period.
  • Original Medicare (Parts A and B) lets you see any doctor who accepts Medicare, while Part C plans (Medicare Advantage) usually require you to use doctors in their network.
  • You must have Part D (prescription drug coverage) or pay a penalty if you go without it for more than 63 days, even if you do not take many medications.

Part A: Hospital Insurance

Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. If you or your spouse paid Medicare taxes for at least 10 years while working, Part A is free — you pay no monthly premium. You do pay a deductible each time you are admitted to the hospital, and the amount changes each year. In 2024, the hospital deductible is $1,676 per benefit period, though this figure changes annually.

A benefit period starts the day you enter the hospital and ends 60 days after you leave without receiving inpatient care. If you return to the hospital after that 60-day gap, a new benefit period begins and you pay a new deductible. After you pay the deductible, Medicare covers all costs for the first 60 days of a hospital stay. Days 61 through 90 require a daily copayment, and if you stay longer than 90 days, you can use "lifetime reserve days" — a limited number of extra days Medicare will cover at a higher copayment.

Part A also covers up to 100 days in a skilled nursing facility (a facility that provides medical care beyond what a regular nursing home offers) if you are admitted within 30 days of a hospital stay of at least three days. Medicare covers all costs for the first 20 days, then you pay a daily copayment for days 21 through 100.

Part B: Medical Insurance

Part B covers doctor visits, outpatient care, medical equipment, and preventive services like screenings and vaccines. Unlike Part A, Part B requires a monthly premium that you pay to Medicare. The standard premium in 2024 is $164.90 per month, though higher-income beneficiaries pay more. You also pay an annual deductible — $240 in 2024 — before Medicare begins to pay its share.

After you meet your deductible, Medicare typically pays 80 percent of the cost of covered services, and you pay 20 percent. This means you share the cost of each doctor visit, lab test, X-ray, or piece of medical equipment. Part B also covers preventive services with no copayment, including annual wellness visits, cancer screenings, and vaccines — Medicare pays the full cost of these services even before you meet your deductible.

Part B is optional, but if you delay signing up past 65 without other health coverage, you will pay a permanent penalty on your monthly premium for as long as you have Medicare. The penalty is 10 percent of the standard premium for each year you could have had Part B but did not enroll.

Part D: Prescription Drug Coverage

Part D covers prescription medications through a private insurance plan that contracts with Medicare. You choose a Part D plan during your initial enrollment period or during the annual enrollment period in the fall. Each plan has a different list of covered drugs, different copayments, and different monthly premiums — plans can range from about $7 to $100 per month depending on the coverage and your location.

Part D plans have a coverage gap, sometimes called the "donut hole." Once you and your plan have spent a certain amount on drugs in a calendar year, you enter the gap and pay a larger share of the cost until you reach a catastrophic coverage threshold. In 2024, the gap begins after $5,830 in total drug costs. The specifics of what you pay in the gap depend on your plan, but manufacturers are required to provide discounts on brand-name drugs.

You must have Part D coverage or pay a penalty if you go without it for more than 63 days in a row, even if you do not take many medications. The penalty is 1 percent of the national average Part D premium for each month you were without coverage, and like the Part B penalty, it is permanent.

Part C: Medicare Advantage Plans

Part C, also called Medicare Advantage, is an alternative way to receive your Medicare benefits. Instead of using Original Medicare (Parts A and B), you enroll in a private insurance plan that is approved by Medicare and contracts with the federal government. The plan must cover everything that Original Medicare covers, but it can do so with different costs, different doctors, and additional benefits.

Most Medicare Advantage plans are Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). HMO plans require you to use doctors and hospitals in their network, except in emergencies. PPO plans let you see out-of-network doctors but charge you more. Many Medicare Advantage plans include Part D prescription drug coverage and additional benefits like dental, vision, or fitness programs — benefits that Original Medicare does not cover.

Medicare Advantage plans have monthly premiums, deductibles, and copayments, but the amounts vary widely by plan and location. Some plans have $0 monthly premiums. You can switch to a different Medicare Advantage plan or back to Original Medicare once per year during the annual enrollment period, which runs from October 15 to December 7.

Costs You Pay: Premiums, Deductibles, and Copayments

Your total Medicare costs depend on which parts you choose and which plan you select. Premiums are the monthly fees you pay to have coverage — Part A has no premium for most people, Part B has a standard premium of $164.90 per month in 2024 (higher for higher incomes), and Part D and Part C premiums vary by plan. Deductibles are the amount you must pay out of pocket before Medicare or your plan begins to pay — Part A has a hospital deductible, Part B has an annual deductible, and Part C plans set their own deductibles.

Copayments are fixed amounts you pay for specific services — for example, $50 for a doctor visit or $15 for a prescription. Coinsurance is a percentage of the cost you pay after you meet your deductible — Original Medicare Part B typically requires you to pay 20 percent coinsurance. Your total out-of-pocket costs are capped each year; once you reach the limit, Medicare pays 100 percent of covered services for the rest of the year. In 2024, the out-of-pocket limit for Original Medicare is $8,550.

If your income is low, you may be able to reduce your costs through programs like the Low-Income Subsidy (LIS) for Part D or the Medicare Savings Programs (MSP), which help pay your premiums and cost-sharing. These programs are run by your state, and may be able to access depends on your income and assets.

When You Can Enroll and Change Your Coverage

Most people enroll in Medicare when they turn 65. Your Initial Enrollment Period is the seven-month window that begins three months before the month you turn 65 and ends three months after. If you enroll during this period, your coverage can start as early as the first day of the month you turn 65. If you miss this window, you pay a permanent penalty on your Part B and Part D premiums.

If you are still working and have health insurance through your employer, you may be able to delay enrolling in Medicare without penalty, but you must enroll within eight months of leaving your job or losing your employer coverage. Once you enroll, you can change your coverage during the Annual Enrollment Period, which runs from October 15 to December 7 each year. Changes take effect on January 1. You can also make changes during the Medicare Advantage Open Enrollment Period from January 1 to March 31 if you are already enrolled in a Part C plan.

If you have a disability or end-stage renal disease, you may be able to enroll in Medicare before 65. People with disabilities can enroll at any age if they have received Social Security Disability Insurance (SSDI) for at least 24 months. People with end-stage renal disease can enroll as soon as they begin dialysis or receive a kidney transplant.

How to Use Your Medicare Coverage

Once you are enrolled, you receive a Medicare card in the mail. When you see a doctor or go to a hospital, you show your card and the provider checks whether they accept Medicare. Most doctors and hospitals accept Medicare, but some do not — it is worth calling ahead to confirm. If you have Original Medicare (Parts A and B), you can see any doctor who accepts Medicare anywhere in the country. If you have a Medicare Advantage plan, you must use doctors and hospitals in your plan's network unless it is an emergency.

Your provider submits a claim to Medicare or your plan, and Medicare or your plan pays their share. You receive a bill for your share — the deductible, copayment, or coinsurance. Keep track of what you have paid toward your deductible and out-of-pocket limit so you know when you have met them and Medicare begins to cover more of your costs.

Frequently Asked Questions

What happens if I do not enroll in Medicare at 65?

If you do not enroll during your Initial Enrollment Period and do not have other may have access to coverage, you pay a permanent penalty on your Part B and Part D premiums for as long as you have Medicare. The penalty is 10 percent of the standard premium for each year you could have had coverage but did not enroll. You can still enroll later, but the penalty stays with you.

Can I have both Medicare and private insurance?

Yes. Many people have Original Medicare (Parts A and B) and also buy a Medigap policy from a private insurance company to cover costs that Medicare does not pay, like copayments and coinsurance. You cannot have both Original Medicare and a Medicare Advantage plan at the same time, but you can have a Medicare Advantage plan and a separate Part D plan.

Do I have to choose a Part D plan if I do not take many medications?

You should enroll in a Part D plan even if you do not currently take medications. If you go without Part D coverage for more than 63 days, you pay a permanent penalty when you do enroll. The penalty is 1 percent of the national average Part D premium for each month you were without coverage.

What if my doctor does not accept Medicare?

You can still see the doctor, but Medicare will not pay, and you will owe the full cost. Some doctors accept Medicare for some patients but not others, so it is worth asking directly. You can search for Medicare-accepting doctors on the Medicare.gov provider search tool or call 1-800-MEDICARE.

Can I switch from Medicare Advantage back to Original Medicare?

Yes, but only during the Annual Enrollment Period (October 15 to December 7) or if you have a may have access to life event like moving out of your plan's service area. If you switch back to Original Medicare, you can also enroll in a Medigap policy to help cover your costs, though some Medigap plans may cost more if you wait to enroll.