Medicare 101: What It Covers & 2026 Costs Explained

Key Takeaways:

Medicare has four parts: Part A covers hospital and inpatient care, Part B covers doctor visits and outpatient services, Part C (Medicare Advantage) bundles A and B through private insurers, and Part D covers prescription drugs.

Eligibility comes through three main paths: turning 65 with a 10-year work history, receiving SSDI for 24 months, or a qualifying diagnosis of ESRD or ALS.

In 2026, the standard Part B premium is $202.90/month with a $283 deductible, the Part A hospital deductible is $1,736 per benefit period, and Part D out-of-pocket costs are capped at $2,100.

Original Medicare has no out-of-pocket spending cap and excludes most dental, vision, and hearing care, which is why many beneficiaries add Medigap, Medicare Advantage, or Part D coverage.

Medicare Covers 69 Million Americans and Is Set to Exceed $905 Billion in Annual Costs. Here's Who Qualifies, What's Included, and Where the Gaps Are.

For millions of Americans, Medicare is the difference between getting care and going without. Understanding what it actually covers (and what it doesn’t) isn’t always straightforward, however.

Today, more than 69 million people rely on Medicare, yet many still face confusing coverage rules and significant out-of-pocket costs.

This guide explains what Medicare is, who qualifies, what each part covers, what Medicare costs in 2026, where coverage gaps can create financial strain, and how to navigate enrollment with confidence.

By the end, you’ll have a clear, practical understanding of what Medicare covers and what steps you may need to take to avoid unexpected costs.

69 million covered | $905B+ annual spending | 80M+ projected by 2030

What Is Medicare?

Medicare is a federal health insurance program that provides coverage primarily to Americans aged 65 and older, as well as certain younger individuals with disabilities or conditions like End-Stage Renal Disease (ESRD) and ALS. It is the largest health insurance program in the United States.

Medicare’s size and impact continue to grow. In 2022, the program covered about 65 million people at a cost of roughly $905 billion [1], and today, nearly 69.9 million Americans are enrolled [11]. By 2030, Medicare is projected to cover more than 80 million beneficiaries, with annual spending expected to reach approximately $1.5 trillion [1]. As enrollment and costs rise, understanding how Medicare works and what it actually covers becomes increasingly important for individuals and families planning for healthcare in retirement.

Medicare is divided into four main parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plans offered by private insurers), and Part D (prescription drug coverage) [2]. Many beneficiaries also rely on supplemental coverage, such as Medigap policies, or additional support through programs like Medicaid (for dual-eligible individuals) and Extra Help for prescription drug costs. Together, these components form a system that can be comprehensive—but also complex to navigate.

For a deeper look at how healthcare affordability affects older Americans, see Mosaic’s research on healthcare access challenges.

Who Qualifies for Medicare?

Understanding Medicare eligibility is the first step in determining what coverage you may have access to and when.

Most people qualify for Medicare through one of three primary pathways:

Age-based eligibility: Individuals age 65 or older who have worked and paid Medicare taxes for at least 10 years (40 quarters), or who are married to someone who has.

Disability-based eligibility: Individuals under 65 who have received Social Security Disability Insurance (SSDI) benefits for 24 months.

Condition-based eligibility: Individuals diagnosed with End-Stage Renal Disease (ESRD) requiring dialysis or a kidney transplant, or those with ALS (Lou Gehrig’s disease), who typically qualify for Medicare immediately upon diagnosis or SSDI entitlement.

Medicare Eligibility at a Glance

Pathway	Key Requirement	Waiting Period
Age 65+	65 or older with sufficient work history (or spouse’s)	None
Disability (SSDI)	Receiving SSDI benefits	24 months
ESRD	Diagnosed with ESRD requiring dialysis/transplant	Varies (often minimal delay)
ALS	Diagnosed with ALS and receiving SSDI	None

In addition to these pathways, some individuals qualify for both Medicare and Medicaid. These dual-eligible beneficiaries often receive additional financial assistance with premiums, deductibles, and other out-of-pocket costs. This population is significant—dually eligible individuals made up 20% of Medicare Rights Center helpline clients [3], highlighting how common and critical this support is for navigating healthcare affordability.

It’s also important to note that eligibility does not always guarantee enrollment. Many older adults still fall through the cracks due to cost, confusion, or administrative barriers. For more on this issue, see Mosaic’s analysis of older adults without Medicare coverage.

What Does Medicare Cover?

Medicare coverage is divided into multiple parts, each designed to cover a different type of care. Understanding how these parts work together is essential for making informed healthcare decisions and avoiding unexpected out-of-pocket costs.

In general, Medicare covers services that are considered “reasonable and necessary” for diagnosing or treating a medical condition, fall within a defined benefit category, and are not excluded by law. Coverage decisions are guided by National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs), which establish what is covered at the federal and regional levels.

Medicare Coverage at a Glance

Medicare Part	What It Covers	Who Provides It
Part A (Hospital Insurance)	Inpatient hospital care, skilled nursing facility care, hospice, some home health services	Federal government
Part B (Medical Insurance)	Doctor visits, outpatient care, preventive services, medical equipment	Federal government
Part C (Medicare Advantage)	Combines Part A & B; often includes extra benefits like dental, vision, and drug coverage	Private insurers approved by Medicare
Part D (Prescription Drugs)	Outpatient prescription medications	Private insurers approved by Medicare

Medicare Part A: Hospital Insurance

Medicare Part A is hospital insurance that covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services.

What Part A covers:

Inpatient hospital care (semi-private room, meals, nursing care, medications during the stay)

Skilled nursing facility (SNF) care following a qualifying hospital stay

Hospice care for individuals with terminal illnesses

Limited home health services (intermittent skilled care)

What Part A costs (2026):

$1,736 deductible per benefit period [4]

Skilled nursing facility:

$0 for days 1–20

$217 per day for days 21–100 [4]

Even with coverage, extended hospital or recovery periods can result in significant out-of-pocket costs.

What Part A does not cover:

Long-term custodial care (e.g., ongoing nursing home stays)

Private-duty nursing

Non-medical personal care (help with bathing, dressing, etc.)

Medicare Part B: Medical Insurance

Medicare Part B is medical insurance covering doctor visits, outpatient care, preventive services, durable medical equipment, and some home health services not covered under Part A.

What Part B covers:

Physician and specialist visits

Outpatient procedures and surgeries

Preventive services (mammograms, colonoscopies, flu shots, annual wellness visits)

Durable medical equipment (wheelchairs, walkers, oxygen equipment)

Mental health services (therapy, partial hospitalization)

Ambulance services when medically necessary

What Part B costs (2026):

$202.90 monthly premium (standard) [4]

$283 annual deductible [4]

Typically 20% coinsurance after the deductible [4]

One important detail: Unlike many private insurance plans, Original Medicare does not include a cap on out-of-pocket spending for Part B services.

What Part B does not cover:

Routine dental care

Vision exams and glasses

Hearing aids and exams

These gaps are a common source of confusion and a major reason many beneficiaries seek supplemental coverage. For more on how these limitations affect older adults, see Mosaic’s research on healthcare access challenges.

Medicare Part C: Medicare Advantage Plans

Medicare Advantage (Part C) refers to private health insurance plans approved by Medicare that bundle Part A and Part B benefits—and often include prescription drug coverage, dental, vision, and hearing benefits—into a single plan.

All Medicare Advantage plans must cover at least the same services as Original Medicare (Parts A and B) except for hospice care, which continues to be covered under Part A [5].

Key facts about Medicare Advantage:

More than half of eligible beneficiaries have enrolled in Medicare Advantage plans since 2023 [6]

Plans often include additional benefits not covered by Original Medicare

Many plans offer low or $0 premiums (though other costs still apply)

Important trade-offs:

Most plans require using in-network providers

Costs (deductibles, copays, out-of-pocket limits) vary significantly by plan

Beneficiaries often must choose from dozens of plan options, adding complexity to enrollment decisions [2]

While Medicare Advantage can simplify coverage and add benefits, it also introduces variability. This is why it’s important to compare plans carefully based on individual healthcare needs.

Medicare Part D: Prescription Drug Coverage

Medicare Part D is prescription drug coverage offered through private insurance plans that help pay for outpatient medications. It is available as a stand-alone plan (with Original Medicare) or bundled into Medicare Advantage plans.

Part D coverage is structured in phases:

Deductible phase: You pay the full cost of medications up to the plan’s deductible

Initial coverage phase: You and the plan share costs (copays or coinsurance)

Coverage gap (“donut hole”): Cost-sharing continues, though recent reforms have reduced the burden

Catastrophic coverage: Once you reach the out-of-pocket threshold, you pay $0 for covered drugs

Key 2026 figures:

Maximum deductible: $615 [7]

Catastrophic coverage threshold: $2,100 [7]

Because each plan has its own formulary (list of covered drugs), costs and coverage can vary widely. Reviewing plans based on the specific medications you take is critical.

Medigap Supplemental Insurance

Medigap (Medicare Supplement Insurance) refers to standardized private insurance policies that help cover the out-of-pocket costs left by Original Medicare, including deductibles, copayments, and coinsurance.

Key things to know:

Medigap is only available to individuals enrolled in Original Medicare (Parts A and B)

It cannot be used with Medicare Advantage plans

Plans are standardized and labeled (A, B, C, D, F, G, K, L, M, N), meaning benefits are the same regardless of insurer, though premiums vary

Beneficiaries must choose from multiple plan options, adding another layer of decision-making [2]

2026 note:

High-deductible Medigap plans (such as Plans F and G) have a deductible of $2,950 [7]

Medigap Plan Comparison (Common Options)

Plan	Covers Part A Deductible	Covers Part B Coinsurance	Covers Excess Charges	Foreign Travel Emergency
Plan F	Yes	Yes	Yes	Yes
Plan G	Yes	Yes	Yes (except Part B deductible)	Yes
Plan N	Yes	Yes (with copays)	No	Yes

Medigap can provide more predictable healthcare costs, but premiums vary and should be weighed against expected healthcare usage.

How Much Does Medicare Cost?

Understanding Medicare costs is essential because while the program covers many services, it does not eliminate out-of-pocket expenses. Costs vary depending on which parts of Medicare you have, your income, and whether you carry supplemental coverage.

Even with insurance, many older adults face meaningful financial strain. For a deeper look at how out-of-pocket costs impact aging populations, explore Mosaic’s data on national out-of-pocket healthcare spending.

Medicare Costs at a Glance (2026)

Medicare Part	Monthly Premium	Annual Deductible	Key Cost-Sharing
Part A	$0 for most (up to $565 if not premium-free)	$1,736 per benefit period	Hospital coinsurance; SNF: $0 (days 1–20), $217/day (days 21–100)
Part B	$202.90 (standard; higher with IRMAA)	$283	Typically 20% coinsurance; no out-of-pocket cap
Part C (MA)	~$14 average (plus Part B premium)	Varies by plan	Copays/coinsurance; max out-of-pocket up to $9,250
Part D	~$34.50 average	Up to $615	Tiered copays; $0 after $2,100 out-of-pocket threshold
Medigap	Varies widely	Varies (up to $2,950 for high-deductible plans)	Covers some or all cost-sharing from Parts A & B

Medicare Part A Premiums and Deductibles

Most people do not pay a monthly premium for Part A, but this depends on work history. Premium-free Part A is available to individuals (or their spouses) who have paid Medicare taxes for at least 40 quarters. If not, premiums can be as high as $565 per month in 2026 [4].

The primary cost exposure comes from hospital stays:

$1,736 deductible per benefit period (2026) [4]

A benefit period begins when you are admitted as a hospital inpatient and ends after you have gone 60 consecutive days without inpatient care. If you are hospitalized again after that window, a new benefit period—and a new deductible—applies.

Skilled nursing facility (SNF) costs:

$0 for days 1–20

$217 per day for days 21–100 [4]

These costs can accumulate quickly during extended recovery periods, even for beneficiaries with premium-free coverage.

Medicare Part B Premiums, Deductibles, and Coinsurance

Medicare Part B is the most widely used and most consistently paid portion of Medicare.

$202.90 monthly premium (standard, 2026) [4]

Higher-income individuals pay more through Income-Related Monthly Adjustment Amounts (IRMAA)

$283 annual deductible (2026) [4]

Typically 20% coinsurance after the deductible [4]

One key limitation: Original Medicare does not include an out-of-pocket maximum, meaning costs can continue to add up for ongoing care.

Late enrollment penalty:
If you delay enrolling in Part B, your premium may increase by 10% for each 12-month period you were eligible but not enrolled [5]. This penalty is permanent and increases your monthly premium for life.

For individuals with both Medicare and Medicaid, Medicaid may cover the Part B premium; states pay the standard $202.90 monthly premium in 2026 [4].

Medicare Part C Plan Costs and Out-of-Pocket Limits

Medicare Advantage plans often attract enrollees with low monthly premiums, but the full cost picture is more complex.

Average monthly premium: $14 (2026) [7]

Beneficiaries must still pay their Part B premium

Out-of-pocket limits:

Federal maximum: $9,250 annually [7]

Plans may offer lower caps

Unlike Original Medicare, these plans include a built-in spending cap, which is an important financial protection. However, reaching that cap can still represent a significant expense.

Affordability trend:
Medicare Advantage out-of-pocket limits have increased for a second consecutive year, raising concerns about accessibility.

“Seniors are being asked to pay more for their health care while having fewer choices. That’s not sustainable,” said Mary Beth Donahue, president and CEO of the Better Medicare Alliance, in a recent announcement on Medicare Advantage cost trends from an analysis by Avalere of the Centers for Medicare & Medicaid Services (CMS) 2025 Medicare Advantage Landscape File data. [8].

For more on the policy factors driving these changes, see Mosaic’s analysis of Medicare Advantage overpayments or use Mosaic’s Medicare calculator to add an out-of-pocket cap to coverage limits.

Medicare Part D Premiums and Cost Sharing

Prescription drug costs under Medicare vary widely depending on the plan and medications used.

Average monthly premium: $34.50 (2026) [7]

Maximum deductible: $615 (2026) [7]

Part D includes several cost-sharing phases:

Phase	What You Pay	When It Applies
Deductible	100% of drug costs	Until deductible is met
Initial Coverage	Copays or coinsurance	After deductible, until spending threshold
Coverage Gap	Reduced cost-sharing	Mid-range spending (post-reform, less severe)
Catastrophic	$0 for covered drugs	After $2,100 out-of-pocket (2026)

The catastrophic coverage threshold increases to $2,100 in 2026 [7], after which beneficiaries pay nothing for covered medications for the remainder of the year.

Because each plan has a different formulary, choosing the right plan depends heavily on the specific prescriptions you take.

Medigap Premiums and Coverage Gaps

Medigap (Medicare Supplement Insurance) helps cover out-of-pocket costs from Original Medicare, but it comes with its own premiums.

Costs vary widely based on:

Plan type (A–N)

Insurance provider

Location

Pricing model (community-rated, issue-age-rated, attained-age-rated)

There is no single “standard” premium for Medigap.

High-deductible options:

Plans F and G (high-deductible versions) require beneficiaries to pay $2,950 out of pocket in 2026 before coverage begins [7]

Enrollment timing matters:
The best time to enroll is during the six-month Medigap open enrollment period, which begins when you turn 65 and enroll in Part B. During this window, insurers cannot deny coverage or charge more based on pre-existing conditions.

What Medigap does not cover:

Prescription drugs

Long-term care

Dental, vision, or hearing services

Medigap can make healthcare costs more predictable, but whether it’s worth the premium depends on your expected healthcare needs and risk tolerance.

What Are Common Medicare Access & Affordability Issues?

Medicare provides essential coverage for tens of millions of Americans, but coverage does not always mean care is affordable. Beneficiaries can still face premiums, deductibles, coinsurance, prescription drug costs, provider access issues, and coverage limitations that make it difficult to get needed care.

In 2023, more than one-third of Medicare beneficiaries (36%) delayed or skipped care because of affordability concerns [9]. For people living on fixed or limited incomes, even routine medical costs can force difficult trade-offs between healthcare, housing, food, and other basic needs.

Affordability challenges are not evenly distributed. About 32% of Medicare beneficiaries—roughly 18.4 million people—live below 200% of the federal poverty level [3]. Black and Hispanic enrollees are also more likely to report difficulty affording prescriptions and other healthcare services, underscoring how Medicare coverage gaps can deepen existing health and economic inequities.

Medicare Advantage growth has added another layer of complexity. In 2025, Medicare Advantage payments to private plans were estimated to be about 20% higher per person than comparable spending in Original Medicare, adding roughly $84 billion in federal spending [6]. As enrollment grows, these payment differences raise questions about program sustainability, plan transparency, and whether beneficiaries are receiving value equal to the public investment.

Many beneficiaries may qualify for help but never receive it. Extra Help, also known as the Low-Income Subsidy, can save eligible beneficiaries an average of about $5,300 per year, according to the Social Security Administration [3]. But complex eligibility rules, paperwork, and outreach gaps can keep people from enrolling.

Plan selection can also be difficult to navigate. Agents and brokers play an important role in helping beneficiaries compare coverage, but rising commissions and lead-buying practices have raised concerns about whether recommendations always align with beneficiaries’ best interests [2]. CMS sets maximum commissions in the Medicare Advantage market, and these commissions have grown rapidly in recent years [2].

For more on the human cost of healthcare affordability, see Mosaic’s coverage of why drug costs remain a life-or-death issue for many Americans. To explore policy solutions aimed at lowering costs, see Mosaic’s Health Savers Initiative analysis on equalizing Medicare payments regardless of site of care.

How to Enroll in Medicare

Enrolling in Medicare starts with knowing when you are eligible and which enrollment window applies to you. Missing the right window can delay coverage and, in some cases, create permanent penalties.

Your Initial Enrollment Period (IEP) is the most important window for most people. It lasts seven months: the three months before your 65th birthday month, your birthday month, and the three months after.

There are two main ways enrollment happens:

Automatic enrollment: If you are already receiving Social Security benefits when you turn 65, you are typically enrolled in Medicare Parts A and B automatically.

Manual enrollment: If you are not receiving Social Security benefits, you can apply through Social Security online at ssa.gov, by phone, or at a local Social Security office.

Other key Medicare enrollment periods include:

Enrollment Period	When It Happens	What It’s For
Initial Enrollment Period (IEP)	7-month window around your 65th birthday	First-time enrollment in Medicare
General Enrollment Period (GEP)	January 1–March 31 each year	For people who missed their IEP
Special Enrollment Period (SEP)	After qualifying life events	For changes such as losing employer coverage or moving
Annual Enrollment Period (AEP)	October 15–December 7 each year	Changing Medicare Advantage or Part D plans

The Part B late enrollment penalty is especially important. If you delay Part B enrollment without qualifying coverage, your premium may increase by 10% for each full 12-month period you were eligible but not enrolled [5]. This penalty is permanent and is added to your monthly premium for as long as you have Part B.

Medicare Enrollment Steps at a Glance

Determine eligibility

Choose Original Medicare or Medicare Advantage

Add Part D prescription drug coverage if needed

Consider Medigap if choosing Original Medicare

Confirm enrollment and coverage start dates

A clear enrollment plan can help beneficiaries avoid gaps in coverage, unnecessary penalties, and plan choices that do not match their healthcare needs.

Navigating Medicare Coverage Limitations and Resources

While Medicare provides broad coverage, it does not pay for every type of care. Understanding these limitations and knowing where to find additional support can help beneficiaries avoid unexpected costs and make more informed decisions.

Original Medicare (Parts A and B) generally does not cover:

Most dental care (cleanings, fillings, dentures)

Routine vision care (eye exams for glasses, eyeglasses or contact lenses)

Hearing aids and exams for fitting hearing aids

Most long-term custodial care (such as extended nursing home stays not preceded by a qualifying hospital stay)

Cosmetic surgery

Care received outside the United States (with limited exceptions)

Medicare Advantage plans may offer coverage for some of these services—particularly dental, vision, hearing, and wellness benefits—but coverage varies widely by plan and location. Reviewing plan details carefully is essential.

Programs and Resources That Can Help

Several programs exist to help reduce costs and improve access:

Medicare Savings Programs (MSPs): State-administered programs that help pay Medicare premiums, deductibles, and coinsurance for eligible individuals with limited income.

Extra Help (Low-Income Subsidy): Assists with Part D prescription drug costs and saves eligible beneficiaries an average of about $5,300 per year [3].

State Health Insurance Assistance Programs (SHIPs): Provide free, unbiased, local counseling to help beneficiaries understand and compare their Medicare options.

GUIDE Model for Dementia Care: A CMS initiative offering no-cost care coordination and support services for eligible individuals living with dementia.

For a deeper look at how coverage decisions affect access to treatment, see Mosaic’s analysis of Alzheimer’s treatment coverage and Medicare policy. You can also explore broader healthcare access research or use Mosaic's Negotiation Outcomes Calculator to understand how policy changes may impact drug costs and Medicare spending.

While Medicare can be a powerful foundation for healthcare coverage, navigating its limitations often requires additional tools, planning, and support. West Health Mosaic provides ongoing research and analysis to help beneficiaries, caregivers, and advocates make more informed decisions in an evolving healthcare landscape.

Frequently Asked Questions

What does Medicare cover and are there exclusions?

Medicare covers hospital stays (Part A), doctor visits and outpatient care (Part B), Medicare Advantage plans that bundle benefits (Part C), and prescription drugs (Part D). However, Original Medicare generally does not cover dental, vision, hearing aids, or long-term custodial care.

When am I eligible to enroll in Medicare?

Most people become eligible at age 65 if they or a spouse paid Medicare taxes for at least 10 years. Younger individuals may qualify with a disability (after 24 months of SSDI), End-Stage Renal Disease, or ALS.

How much will I pay out of pocket with Medicare?

Out-of-pocket costs depend on your coverage. In 2026, the standard Part B premium is $202.90 per month with a $283 annual deductible and 20% coinsurance, while Part A includes a $1,736 hospital deductible per benefit period. Supplemental coverage like Medigap or Medicare Advantage can help reduce these costs.

Can Medicare coverage change if I move?

Original Medicare works nationwide, so moving does not affect your Part A or Part B coverage. However, Medicare Advantage and Part D plans operate within specific service areas, so you may need to change plans if you move outside your current plan’s coverage area.

What programs help with Medicare costs for low-income beneficiaries?

Medicare Savings Programs can help pay premiums and cost-sharing, while the Extra Help program significantly reduces prescription drug costs. State Health Insurance Assistance Programs (SHIPs) also provide free counseling to help beneficiaries find and enroll in the assistance they qualify for.