Medicare is the federal health insurance program in the United States that covers people aged 65 and older, younger people with certain disabilities, and people with permanent kidney failure. It’s run by the Centers for Medicare & Medicaid Services (CMS), and your coverage works the same no matter which state you live in.
Who Qualifies for Medicare
Most people become eligible at age 65. If you’re under 65 and receiving Social Security disability benefits, you qualify automatically after 24 months of receiving those benefits. Two conditions create faster paths to coverage: permanent kidney failure requiring dialysis or a transplant, and ALS (Lou Gehrig’s disease). If you have ALS, Medicare starts the same month your Social Security benefits begin, with no waiting period.
The Four Parts of Medicare
Medicare is split into distinct parts, each covering a different category of care. Understanding what each part does helps you figure out what you’re paying for and what gaps you might need to fill.
Part A: Hospital Insurance
Part A covers inpatient care. That includes hospital stays, skilled nursing facility care after a hospitalization, hospice care, and some home health services. Most people don’t pay a monthly premium for Part A if they or a spouse paid Medicare taxes for at least 10 years while working. You do pay a deductible when admitted to the hospital: $1,676 per benefit period in 2025.
Part B: Medical Insurance
Part B covers outpatient care, which is everything that happens outside of a hospital admission. Doctor visits, lab tests, ambulance services, mental health care, durable medical equipment like wheelchairs or oxygen tanks, and limited outpatient prescriptions all fall under Part B. It also covers preventive services, including screenings and vaccines, and you typically pay nothing out of pocket for preventive care when your provider accepts Medicare’s payment terms.
Part B has a standard monthly premium and after you meet your annual deductible, you generally pay 20% of the cost for most services.
Part C: Medicare Advantage
Medicare Advantage plans are an alternative way to get your Medicare coverage. Instead of the government paying your claims directly (called Original Medicare), a private insurance company approved by Medicare handles your benefits. These plans bundle Part A and Part B together, and most also include Part D drug coverage. Many offer extras that Original Medicare doesn’t cover at all, like routine dental cleanings, vision exams, hearing aids, and even gym memberships or fitness programs.
The tradeoff is that Medicare Advantage plans typically use provider networks, meaning you may need to see doctors and hospitals within that network to keep your costs low. Original Medicare lets you go to any provider in the country that accepts Medicare.
Part D: Prescription Drug Coverage
Part D helps pay for outpatient prescription drugs, both brand-name and generic. It’s offered through private insurance companies approved by Medicare, and it’s optional. You can add a Part D plan to Original Medicare, or get drug coverage built into a Medicare Advantage plan. Starting in 2025, a major change caps your total out-of-pocket spending on prescriptions at $2,000 per year, a protection created by the Inflation Reduction Act. Before this cap, some people with expensive medications faced costs of $5,000 or more annually.
Medigap: Filling the Cost Gaps
Original Medicare (Parts A and B) doesn’t cover everything. You’re still responsible for deductibles, copayments (flat fees like $30 per visit), and coinsurance (a percentage of the bill, often 20%). Medicare Supplement Insurance, commonly called Medigap, is extra coverage you buy from a private insurer specifically to help with those out-of-pocket costs.
You need to have both Part A and Part B to buy a Medigap policy. And one important detail: Medigap only works with Original Medicare. If you choose a Medicare Advantage plan instead, you can’t use a Medigap policy alongside it.
When and How to Enroll
Your Initial Enrollment Period is a seven-month window that starts three months before the month you turn 65 and ends three months after your birthday month. Signing up during this window is important because delaying can cost you. If you don’t enroll in Part B when you’re first eligible and you don’t have qualifying coverage through an employer, you’ll pay a late enrollment penalty of 10% added to your monthly premium for every full year you waited. That penalty sticks with you for as long as you have Part B.
For example, if you delayed enrollment by two years, your Part B premium would be permanently 20% higher than the standard amount. There are exceptions if you had employer-sponsored health insurance during that gap, which triggers a Special Enrollment Period so you can sign up without a penalty.
Medicare vs. Medicaid
These two programs are frequently confused because of their similar names, but they serve different populations and work differently. Medicare is based on age or disability status. It’s a federal program with uniform rules across all 50 states, and eligibility has nothing to do with your income. Medicaid, on the other hand, is specifically for people with limited income and resources. It’s jointly funded by the federal government and individual states, and each state sets its own eligibility rules and benefits, so coverage varies depending on where you live.
Some people qualify for both programs simultaneously. These “dual-eligible” individuals get help from Medicaid covering costs that Medicare doesn’t, like long-term nursing home care or Medicare premiums and deductibles.