Medicare, the national health insurance program for U.S. citizens and permanent legal residents, is the most common insurance option for seniors. While we can trace national healthcare system chatter back to the early 1900s, the program wasn’t signed into law until 1965. Nineteen million people signed up for Medicare during its first year, with the program currently serving almost 69 million Americans (per the latest Centers for Medicare & Medicaid Services (CMS) data). Since it plays an important role in medical costs as you age, it’s imperative you understand exactly how Medicare works—especially if retirement is on your horizon. Let’s dive in.

The four parts of Medicare

Medicare’s four parts each cover specific services, with Part A and Part B referred to as “Original Medicare” whereby the government pays healthcare providers directly for services rendered to patients. Nearly all physicians and hospitals in the United States accept Original Medicare, but let’s go ahead and explore all four parts in more detail…

Medicare Part A (hospital insurance)

Medicare Part A covers patient care in a hospital or skilled nursing facility, in-home hospice, and limited home healthcare services. Individuals who enroll in Medicare automatically receive Part A and are typically not required to pay a monthly premium, instead paying a $1,676 deductible (as of 2025) per benefit period that begins upon admission to a hospital or skilled nursing facility and ends 60 days after discharge. Admittance to a hospital or skilled nursing facility after one benefit period ends initiates a new one, requiring patients to pay another deductible.

Medicare Part B (medical insurance)

Medicare Part B covers medical services and supplies necessary to treat health conditions including visits to doctors and other healthcare providers, medical equipment, and ambulance services. It also covers some preventive services such as annual wellness visits, flu shots, and screenings for cancer/diabetes/cardiovascular diseases.

Individuals who lack “creditable coverage” from another source (e.g., an employer) are required to enroll in Part B, with a failure to enroll sometimes triggering a 10% monthly premium fee for each 12-month period you could’ve had Part B but didn’t. Most patients pay a monthly premium for Part B, and everyone must meet a $257 deductible in 2025 before benefits kick in.

Medicare Part C (Medicare Advantage)

Medicare Part C, also known as Medicare Advantage, consists of bundled plans as an alternative to Original Medicare (Parts A and B). Offered by private Medicare-approved companies, these plans include the same coverage provided by Medicare Parts A and B and also often loop in optional vision, dental, hearing, and prescription drug coverage. Extra services not covered by Original Medicare (e.g., transportation to doctors’ appointments) are sometimes included as well. You can purchase a Medicare Advantage plan only after enrolling in Original Medicare, and monthly premiums vary based on specific benefits and deductibles.

Medicare Part D (prescription drug coverage)

Medicare Part D is a program that provides prescription drug coverage via private, Medicare-approved insurance companies. Those eligible for Original Medicare automatically qualify for Medicare Part D but must first enroll in Medicare Part A and/or Part B, and it's important to note that those with a Medicare Advantage plan that includes prescription drug coverage don’t need to enroll in Part D separately.

How to qualify for Medicare

Most people qualify for full Medicare benefits at age 65 based on their (or their spouse’s) employment record (or earlier if qualifying disabilities are present). Here are some prerequisites:

· You must be a U.S. citizen or permanent legal resident who’s lived in the United States for at least five consecutive years.

· You or your spouse must have paid into Medicare payroll taxes while working for at least 10 years.

· You must be eligible to receive (or are currently receiving) Social Security or Railroad Retirement Board benefits.

Meeting the above criteria means you’ll receive basic Medicare coverage (Part A) free of charge when you turn 65. If you fail to meet the above criteria but are a U.S. citizen or permanent legal resident who’s lived in the U.S. for at least five years, meanwhile, you can still receive full Medicare benefits but must instead buy into them.

How to enroll in Medicare

If you’ve received Social Security or Railroad Retirement Board benefits for at least four months before turning 65, the government will typically automatically enroll you in Medicare Part A and Medicare Part B at this age—with your Medicare card often arriving in the mail with instructions three months prior to your birthday.

All other eligible folks have a seven-month window to enroll in Medicare, a period that begins three months prior to age 65 and ends three months after your birthday month. You can apply for Medicare benefits online or over the phone.

If you miss your initial enrollment period, don’t panic! You can sign up during the Medicare General Enrollment Period (January 1–March 31), with coverage beginning the month after you do so. However, you may be charged a penalty if you lack an SEP (special enrollment period), which is allowed only in light of specific life events such as losing employer coverage.

Medicare Supplement plans help fill any gaps

Offered by various insurance companies, Medicare Supplement plans (also known as Medigap plans) help cover many out-of-pocket costs Original Medicare does not such as copayments and deductibles. Some Medigap policies even provide coverage for medical care when you travel outside of the U.S., a departure from Original Medicare.

The initial open Medigap enrollment period lasts for six months, beginning on the date your Medicare Part B coverage becomes effective. Although you can still purchase a Medigap policy after this window closes, enrolling within the six-month period ensures insurers cannot deny you coverage or charge higher premiums due to any pre-existing conditions.

The biggest, most important item Medicare doesn’t cover

Medicare doesn’t cover all healthcare-related expenses and indeed has significant gaps, the most notable of which is long-term care: providing only limited coverage for this in specific circumstances. This is notable, as recent studies have shown median nursing home care costs exceed $110,000 a year and can thus quickly jeopardize retirement plans.

Long-term care insurance policies are designed to cover out-of-pocket expenses related to home care, assisted living, and nursing home care—benefits not covered by Medicare or other public programs—and offer several key advantages, not only helping to protect your savings but also providing additional care options. Should you qualify for Medicaid, for example, you may be restricted to facilities that accept payments from the program.

Experts recommend purchasing a long-term care insurance policy no later than your fifties to secure a lower premium. You can also buy a life insurance policy that includes a long-term care rider, one significant benefit of which (compared to a standalone LTC policy) is that the policy still pays out a death benefit if you don’t use the care benefit—whereas standalone policies may feel like wasted money if you never file a claim.

In sum: Medicare 101

With healthcare expenses constantly rising over time, it’s important to know your Medicare options to help combat these costs—especially during retirement. Find these insurance options confusing? You’re certainly aren’t alone. Thankfully, a Medicare insurance expert or financial advisor can help you navigate them to ultimately pinpoint the best choice for our own unique needs.

Still have questions about Medicare? Schedule a FREE discovery call with one of our CFP® professionals to get them answered.

FAQ

Some Medicare Advantage plans offer a Medicare Giveback benefit whereby plan carriers pay some (or all!) of the Medicare Part B premium (currently $185). You must be enrolled in Original Medicare, pay your own Part B premium, and live in a plan service area that provides this benefit in order to qualify.
There is no right or wrong answer here, as both options in fact work quite well. Decisions about which program best suits you also aren’t so clear-cut as each has its pros and cons, which is precisely why we recommend speaking with a financial advisor or Medicare expert accordingly. You can also click here to read more about Medicare Advantage and Medigap plans.
Medicare generally acts as your primary insurance with private insurance, meaning the bill is first submitted to Medicare whenever you incur a healthcare expense before secondary insurance kicks in to cover any remaining balance.
If you still belong to an employer group plan that covers 20 or more employees or is part of a multi-employer group health plan (often jointly sponsored by two or more employers), however, this would act as the first payer with Medicare as a secondary option—whether you have coverage through your employer or are covered via your spouse’s plan.
While Original Medicare doesn’t cover routine dental or vision care, some Medicare Advantage plans do.
Medicare imposes surcharges on higher-income beneficiaries, specifically for Medicare Parts B and D. This income-related monthly adjustment amount—or “IRMAA” for short—is calculated based on tax returns reported from two years prior (meaning your 2025 income determines your IRMAA in 2027, your 2026 income determines your IRMAA in 2028, and so on).

Medicare 101: A Beginner’s Guide