Medicare 101 · Free resource from Price Services Group, L.L.C.

What is Medicare? Parts A, B, C & D explained for 2026

Medicare has four parts — and choosing the wrong combination at 65 can follow you financially for the rest of your life. Here's what each part covers, what it costs, and how the pieces fit together.

Price Services Group Data Desk

Published June 27, 2026 · 9 min read · Sourced from CMS.gov

Medicare is not a single insurance card — it's a system of four coverage types that work together. Understanding what each part does (and doesn't) cover is the difference between a plan that fits your life and one that leaves expensive gaps. This guide breaks it down in plain language, with no jargon and no upsell.

Every figure below comes from the Centers for Medicare & Medicaid Services (CMS). Sources are linked throughout.

The four parts of Medicare at a glance

Source: Medicare.gov — 2025 Medicare Costs.

Part A — Hospital insurance

Most people receive Part A for free if they or their spouse worked and paid Medicare taxes for at least 10 years (40 quarters). It covers:

• Inpatient hospital care — semi-private room, meals, general nursing, drugs administered during your stay
• Skilled nursing facility (SNF) care — up to 100 days per benefit period after a qualifying 3-day hospital stay
• Hospice care — comfort care for terminal illness (prognosis of 6 months or less)
• Some home health care — physical therapy, skilled nursing visits, when medically necessary

Part A does not cover long-term custodial care (help with bathing, dressing, etc.), dental, vision, or hearing. The Part A deductible applies per benefit period — not per year — which can catch people off guard during a second hospitalization.

Part B — Medical insurance

Part B covers the outpatient side of your care. You pay a monthly premium (deducted from your Social Security benefit if you're collecting), and after your annual deductible, Medicare generally pays 80% of approved costs.

• Doctor and specialist visits
• Outpatient surgery and procedures
• Preventive care — annual wellness visits, screenings, vaccines
• Lab tests, X-rays, MRIs
• Durable medical equipment — wheelchairs, walkers, CPAP machines
• Mental health services
• Some home health care

Part B does not cover most prescription drugs, dental, routine vision, or hearing aids. The 20% cost-sharing under Part B has no annual out-of-pocket maximum in Original Medicare alone — a serious gap if you have a major illness. This is one reason many people add a Medigap supplement or switch to Medicare Advantage.

Part C — Medicare Advantage

Medicare Advantage (MA) is a private insurance alternative to Original Medicare. CMS approves and pays these plans to cover your Medicare benefits. When you enroll in an MA plan:

• You keep your Medicare eligibility but receive care through the plan's network
• The plan covers everything Parts A and B cover
• Most plans include Part D prescription drug coverage (MA-PD)
• Many include extras: dental, vision, hearing, fitness memberships, and transportation
• Plans have an annual out-of-pocket maximum — something Original Medicare lacks

The tradeoff: MA plans use provider networks (HMO or PPO), which means you may need referrals or face higher costs for out-of-network care. Before enrolling, always confirm your doctors and hospital are in the plan's network.

Part D — Prescription drug coverage

Part D adds outpatient prescription drug coverage to Original Medicare. If you're in Medicare Advantage, your plan likely already includes Part D. If you're in Original Medicare, you need to purchase a standalone Part D plan during your enrollment window to avoid a permanent late-enrollment penalty.

Starting in 2026, the Part D annual out-of-pocket cap is $2,100 — meaning no matter how expensive your medications, your yearly drug costs cannot exceed that ceiling. Once you reach that threshold, your plan pays 100% of covered drug costs for the rest of the year. This is a significant change for people on expensive specialty medications.

Part D plans vary by formulary (which drugs are covered and at what tier), pharmacy network, deductible, and monthly premium. The cheapest premium is rarely the best plan — what matters is how your specific medications are tiered.

When do you enroll in Medicare?

Your Initial Enrollment Period (IEP) is a 7-month window centered on your 65th birthday month:

• 3 months before your birthday month
• Your birthday month
• 3 months after your birthday month

Enrolling in the first 3 months means Part B coverage starts on the first day of your birthday month. Waiting until your birthday month or after delays your start date by 1–3 months.

If you have qualifying employer coverage (yours or a spouse's), you may be eligible for a Special Enrollment Period (SEP) that lets you delay Part B without penalty. The key word is qualifying — COBRA, retiree coverage, and marketplace plans do not qualify. If you're unsure whether your employer coverage qualifies, verify before you miss your IEP window.

What most people get wrong

• Thinking Medicare is free. Part A is usually free. Part B, Part D, and most MA plans have premiums. Medigap supplements add another premium.
• Assuming Medicare covers everything. Original Medicare has no cap on your 20% cost-sharing. Dental, vision, and hearing are largely excluded from Original Medicare.
• Waiting too long to enroll. The Part B and Part D penalties are permanent — they follow you for the rest of your life on Medicare.
• Not reviewing coverage annually. Medicare plan networks, formularies, and premiums change every year. A plan that was right at 65 may not be right at 70.

Sources: Medicare.gov — Parts of Medicare · Medicare.gov — 2025 Medicare Costs · CMS Part D Enrollment. Price Services Group, L.L.C. is an independent licensed agency — we do not offer every plan available in your area.