Medicare Basics: 12 Things You Need to Know

Understanding Medicare basics may be one of the most maddening tasks you'll face when heading into retirement. Figuring out when to enroll in Medicare and which parts of Medicare to elect can be daunting even for the savviest retirees.

There are Part A, Part B, Part D, Medigap plans, Medicare Advantage plans, and so on. Medicare open enrollment runs annually from October 15 through December 7 every year. You should understand the basics before you make any choices or changes.

The 2026 digital version of the "Medicare & You" handbook can be downloaded here. This publication provides a rundown of Medicare benefits, health and drug plans, your rights and protections, and answers to the most frequently asked questions about Medicare. It typically includes a preview of how Medicare will change in the coming year. You can also peruse Nine Medicare Changes Coming in 2026 to get a head start learning about next year.

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So, to help you wade into the waters of this complicated federal health insurance program for retirement-age Americans, here are 12 essential things you must know about Medicare.

1. Medicare comes with a cost

Medicare is divided into parts. Part A, which pays for hospital services, is free if you or your spouse paid Medicare payroll taxes for at least 10 years. People who aren't eligible for free Part A can pay a monthly premium of several hundred dollars. The Part A deductible for hospital admissions increased by $60 to $1,736 in 2026, up from $1,676 in 2025.

Part B covers doctor visits and outpatient services, and it comes with a price tag — the standard monthly premium in 2026 is $202.90, up $17.90 from $185 in 2025.

Part D, which covers prescription drug costs, also has a monthly charge that varies depending on which plan you choose; the average Part D total premium for a stand-alone plan in 2026 will be about $34.50 per month, down from $38.31 in 2025. In addition to premium costs, you'll also be subject to co-payments, deductibles and other out-of-pocket costs.

2. Out-of-pocket Medicare Part D prescription drug costs capped annually

In 2026, people with Part D plans won’t pay more than $2,100 in out-of-pocket costs annually. The $2,100 cap is indexed every year to the growth in per capita Part D costs.

Part D enrollees have the option to spread out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month. You can enroll in the Medicare Prescription Payment Plan (MPPP), and after your health or drug plan approves your participation in the MPPP, they will send you a letter explaining your payment options.

You enroll through your Medicare Advantage or Part D drug plan. Depending on the plan, you can sign up by calling or online at your provider's website. You do not enroll through Medicare.

The cap on drug expenses applies only to medications covered by your Part D plan and does not apply to out-of-pocket spending on Medicare Part B drugs. Part B drugs are usually vaccinations, injections a doctor administers, in-office infusions and some outpatient prescription drugs.

3. Fill Medicare's coverage gaps with a Medigap plan

Beneficiaries of traditional Medicare will likely want to sign up for a Medigap supplemental insurance plan offered by private insurance companies to help cover deductibles, co-payments, and other gaps. You can switch Medigap plans at any time, but you could be charged more or denied coverage based on your health if you choose or change plans more than six months after you first signed up for Part B. However, if you are in good health, underwriting could lower your premiums.

Medigap policies are identified by letters A through N. Each policy that goes by the same letter must offer the same basic benefits; usually, the only difference between same-letter policies is the cost.

Plan F has been very popular because of its comprehensive coverage, but as of 2020, Plan F (along with Plan C) is unavailable for new enrollees. The closest substitute for Plan F is Plan G, which pays for everything that Plan F does except the Medicare Part B deductible. Anyone enrolled in Medicare before 2020 can still sign up for plans F and C.

4. Consider Medicare Advantage for all-in-one plans

You can choose to sign up for traditional Medicare: Parts A, B and D, and a supplemental Medigap policy. Or, you can go an alternative route by signing up for Medicare Advantage, which provides medical coverage through private insurance companies. These plans also frequently include prescription drug coverage. If not, you can sign up for stand-alone Part D coverage.

If you are enrolled in a Medicare Advantage plan, you can't sign up for Medigap coverage; you will lose your Medigap coverage if you switch from original Medicare to an Advantage plan.

Also called Part C, Medicare Advantage can have a monthly cost, in addition to the Part B premium, that varies depending on which plan you choose. For 2025, the average monthly premium for Advantage plans is $14.00, down $2.40 from $16.40 in 2025.

Similar to original Medicare, you'll also be subject to co-payments, deductibles and other out-of-pocket costs. However, MA policies have out-of-pocket maximums. For 2026, the maximum out-of-pocket cost for in-network care is $9,250, and $13,900 for both in-network and out-of-network care combined.

In many cases, Medicare Advantage policies charge lower premiums than Medigap plans but have higher cost-sharing. Your choice of providers may be limited to a Medicare Advantage network of hospitals and physicians rather than traditional Medicare, which is accepted nationwide. Recent research has found that sicker enrollees often dump Medicare Advantage in favor of original Medicare.

5. High income earners pay more for Medicare

If your income is above a certain threshold, you'll pay more for Parts B and D. These income-related monthly adjustment amounts (IRMAA) are based on your adjusted gross income from two years earlier.

In 2026, single filers with an adjusted gross income (AGI) from 2024 that exceeds $109,000 ($212,800 for married couples filing jointly) pay a premium in a range that depends on their income. The surcharge ranges from $81.20 to $487.00 in addition to the standard premium of $202.90 in 2026.

For Part D coverage in 2026, single filers with an AGI from 2024 that exceeds $109,000 ($218,000 for married couples filing jointly) pay an extra $14.50 to $91.00 per month, depending on their income.

These surcharges apply whether you have traditional Medicare or a Medicare Advantage Plan.

6. When to sign up for Medicare

If you are already collecting Social Security benefits, you will be automatically enrolled in Parts A and B. You can choose to decline Part B; however, you cannot disenroll from Part A. If you keep Part B, the cost will be deducted from your monthly Social Security benefit.

If you haven't started taking Social Security, you must sign up for Parts A and B. The seven-month initial enrollment period begins three months before the month you turn 65 and ends three months after your birthday month. Sign up in the first three months to ensure coverage starts by the time you turn 65.

You may be able to delay signing up for Medicare if you are still working and have health insurance through your employer (or if you’re covered by your working spouse’s employer coverage). But you will need to follow the rules and must also sign up for Medicare within eight months of losing your employer’s coverage to avoid significant penalties when you do eventually enroll.

7. A quartet of Medicare enrollment periods

There are several other Medicare open enrollment periods, in addition to the seven-month initial enrollment period.

1. General enrollment. If you missed your initial sign-up for Part B during that initial enrollment period and you aren't working (or aren't covered by your spouse's employer coverage), you can sign up for Part B during the general enrollment period that runs from January 1 to March 31. Coverage will begin on July 1. But you will have to pay a 10% penalty for life for each 12-month period you delay in signing up for Part B.

2. Special enrollment. Those covered by a current employer's plan, though, can sign up later without penalty during a special enrollment period, which lasts for eight months after you lose that employer coverage. If you miss your special enrollment period, you must wait until the general enrollment period to sign up.

3. Medicare open enrollment runs from October 15 to December 7 every year, during which you can change Part D plans or Medicare Advantage plans for the following year, or switch between Medicare Advantage and original Medicare.

4. Advantage enrollees also can switch to a new Advantage plan or original Medicare between January 1 and March 31. And if a Medicare Advantage plan or Part D plan available in your area has a five-star quality rating, you can switch to that plan outside of the open enrollment period.

8. Medicare offers more free preventive services and vaccines

Medicare beneficiaries can receive several free preventive services. You get an annual free "wellness" visit to develop or update a personalized prevention plan. Beneficiaries also get a free cardiovascular screening every five years, annual mammograms, annual flu shots, vaccines and screenings for cervical, prostate and colorectal cancers.

9. Medicare telehealth offerings

Although most Medicare Advantage plans have covered telehealth for years, traditional Medicare used to restrict the service to certain devices and practitioners, and patients had to be at a Medicare facility.

Starting on January 30, 2026, you must be in an office or medical facility located in a rural area for most telehealth services. However, you can still get certain telehealth services, such as for mental and behavioral health, in your home, no matter where you live.

Telehealth services were set to shrink starting in early 2025. However, the pandemic-era program was extended in the Continuing Appropriations and Extensions Act, 2026, signed into law on November 12, 2025. All Medicare beneficiaries had access to most telehealth services until January 30, 2026.

10. What Medicare does not cover

While Medicare covers your healthcare, it generally does not cover long-term care — an important distinction. Under certain conditions, particularly after a hospitalization to treat an acute-care episode, Medicare will pay for medically necessary skilled nursing facility or home healthcare.

But Medicare generally does not cover costs for "custodial care" — that is, care that helps you with activities of daily living, such as dressing and bathing. To cover those costs, you will have to rely on your savings, long-term-care insurance, or Medicaid — if you meet the income and asset requirements. Original Medicare also doesn't cover routine dental or eye care, and some items such as dentures or hearing aids.

11. Use a HSA to reimburse you for Medicare premiums and expenses

While it's true that you can’t make new contributions to a health savings account once you enroll in Medicare, you can withdraw the money tax-free from the account to pay Medicare premiums, co-payments and any qualified medical expense not covered by Medicare and any supplemental or secondary insurance. The expenses can be from the current calendar year or past years.

Even if your Medicare premiums are paid directly out of your Social Security benefits, you can withdraw money tax-free from your HSA to reimburse yourself for those expenses. After you turn 65, you can use HSA money tax-free to pay premiums for Medicare Parts B and D and Medicare Advantage plans, but not premiums for Medigap policies.

12. You have the right to appeal a Medicare decision

If you disagree with a coverage or payment decision made by Medicare or a Medicare Advantage health plan, you can file an appeal. The appeals process has five levels, and you can generally go up a level if your appeal is denied at a previous level.

Gather any information that may help your case from your doctor, health care provider or supplier. If you think your health would be seriously harmed by waiting for a decision, you can ask for a fast appeal to be made, and if your doctor or Medicare plan agrees, the plan must decide your request within 72 hours.

Contact your State Health Insurance Assistance Program (SHIP) if you need help filing an appeal.

Related Content

• Nine Medicare Changes Coming in 2026
• What You Will Pay for Medicare in 2026
• Medicare Premiums 2026: IRMAA Brackets and Surcharges for Parts B and D
• 12 FAQs About Medicare
• Six Changes Coming to Social Security in 2026
• You Can Appeal the IRMAA for Medicare Parts B and D