What Is Medicare and How Does It Work?

Key Takeaways

Turning 65 or have a disability? You're eligible for Medicare, which covers hospital stays through Part A and doctor visits through Part B.

Here's how it works: sign up for Parts A and B first, then decide if you want Original Medicare or a Medicare Advantage plan that bundles everything together.

Don't miss your seven-month enrollment window or you'll get hit with late penalties that increase the longer you wait.

What Is Medicare

If you're turning 65, you've probably got Medicare on your mind. It's federal health insurance that kicks in at 65, though you can get it earlier if you have a disability or kidney failure.

Here's the breakdown: Part A handles hospital stays and nursing home care - and here's good news: most people don't pay a dime for it since you already paid into Medicare through taxes during your working years. Part B covers doctor visits and preventive stuff like screenings. This one costs $185 a month in 2025, though you'll pay more if you make more money.

Already getting Social Security? You'll get both parts automatically when you turn 65. From there, you can tack on Part D for prescriptions. Many people also buy Medigap to help with copays and deductibles. Or you can bundle everything with Medicare Advantage - these plans throw in dental and vision too.

How Does Medicare Work

Medicare's simpler than you might think, and no, you don't have to match your spouse's coverage choices. Getting started involves a simple two-step process that lets you customize coverage based on your health care needs and budget.

1
Sign up for Parts A and B
Hit 65? (Or qualify through disability?) You'll sign up for Part A (Hospital Insurance) and Part B (Medical Insurance). Most people get Part A premium-free if they or their spouse worked and paid Medicare taxes for at least 10 years.
2
Pick your coverage style
You can go with Original Medicare (Parts A and B), which lets you see any doctor nationwide who accepts Medicare. You'll add a separate drug plan (Part D) and can buy Medigap coverage to fill the gaps.

Or choose Medicare Advantage: it bundles Part A, Part B and usually Part D into one plan, often with extras like dental and vision. But you'll stick with in-network doctors for routine care. In 2026, your out-of-pocket drug costs cap at $2,100.

Who Is Eligible for Medicare?

Most people think Medicare is just for seniors, but that's not the whole story. Yes, you qualify at 65, but you might get coverage earlier if you're living with a disability, End-Stage Renal Disease or ALS.

The timing part is important as you can sign up for Medicare starting three months before your 65th birthday and three months after, so seven months total. Miss this window and you'll get hit with late penalties that stick around for life. Good news though, if you qualify through kidney failure, coverage can go back up to 12 months before you apply, so don't put off signing up.


You're turning 65	The first day of your birthday month (or the month before if you're born on the 1st)
You have a disability like multiple sclerosis or rheumatoid arthritis	After you've received Social Security disability benefits for 24 months, your coverage starts month 25
You're diagnosed with ALS (Lou Gehrig's disease)	Right away when your Social Security disability benefits begin and no, there’s no waiting around
You have kidney failure (ESRD)	Depends on your treatment: Fourth month after starting dialysis, or the month you're admitted to hospital for the kidney transplant (if surgery happens within 2 months)

What Are Different Parts of Medicare?

Medicare has four parts, and each one covers something different. Once you see how they work together, picking your coverage gets a lot easier. You can also buy a Medicare Supplemental plan if there are costs that you think aren’t covered by Medicare.

Medicare Part A: Hospital Insurance

Part A covers more than just hospital stays. If you need recovery time in a skilled nursing facility after being hospitalized, you're covered for up to 100 days per benefit period. It also covers hospice care and some home health services like physical therapy visits.

What surprises most people: that $1,676 deductible resets with each benefit period, not each calendar year. Get hospitalized in January and again in March? You could pay that deductible twice. The good news? Most people don't pay a monthly premium for Part A since they already paid Medicare taxes during their working years.

Medicare Part B: Medical Insurance

Part B does the heavy lifting for your everyday health care. Sure, it covers doctor visits, but it also handles all those preventive services that actually keep you healthy - your annual wellness visits, cancer screenings, and flu shots cost you nothing when you see providers who accept Medicare.

Need a walker after surgery? Blood sugar monitor for diabetes? Part B covers durable medical equipment, too. You'll pay a $257 deductible once each year, then 20% of costs for most services. That 20% keeps going with no yearly cap, which is exactly why so many people add Medigap.

Medicare Part C or Medicare Advantage Plans

Medicare Advantage bundles everything together. Private insurers bundle Parts A, B and usually D, then throw in perks Original Medicare doesn't touch - dental cleanings, hearing aids, vision care, gym memberships.

The trade? You'll typically stay in-network and need referrals for specialists. But if you prefer knowing exactly what you'll spend, this makes sense. Premiums for Medicare Advantage plans are expected to drop in 2026, and 99% of people have access to at least one plan.

Medicare Part D: Prescription Drug Coverage

This one fills Original Medicare's biggest hole: prescription drugs. You can buy a standalone plan or get coverage bundled in Medicare Advantage. Plans differ wildly - what your neighbor's plan covers might not match yours at all.

The big news for 2026: Your out-of-pocket costs max out at $2,100 annually for covered drugs. Hit that limit, and you're done paying for the year.

WHAT IS MEDICARE SUPPLEMENTAL INSURANCE

Medigap fills the gaps Original Medicare leaves - copayments, coinsurance, deductibles. Plans are standardized by letter, so Plan G from Mutual of Omaha offers identical coverage to Plan G from Blue Cross. You're literally just comparing prices.

You'll pay a monthly premium on top of Part B, but here's what matters: it covers costs that would otherwise come straight from your wallet. Can't have both Medigap and Medicare Advantage, though - pick one path.

How Can You Sign Up for Medicare?

Figuring out Medicare enrollment can feel confusing with all the rules about timing and paperwork. The truth is, signing up is simpler than most people expect. Your path depends on whether you're already getting Social Security benefits, still working or retiring right at 65. Here's what you need to know to avoid penalties and get covered on time.


Already getting Social Security benefits	Medicare automatically enrolls you three months before your 65th birthday	Nothing! Your card arrives in the mail. Just check it when it comes to make sure everything looks right
Not getting Social Security yet	You need to sign up during your seven-month enrollment window (three months before through three months after your birthday)	Apply online at ssa.gov (it takes about 10 minutes), call 1-800-772-1213 or stop by your local Social Security office
Still working past 65	You can delay Part B without penalties if you have employer coverage	Sign up within eight months (Special Enrollment Period) after your job or coverage ends. Contact Social Security the month before you retire so coverage starts right away
Worked for a railroad	Railroad Retirement Board handles your enrollment instead of Social Security	Call 1-877-772-5772 (TTY: 1-312-751-4701)
Want Medicare Advantage or Part D	You need Part A and Part B first	Once you have both, compare plans at medicare.gov/plan-compare. You can enroll online, call the plan or mail a paper form

WHY YOUR ENROLLMENT TIMING MATTERS

Timing is important because if you sign up in the three months before you turn 65 and your coverage starts on your birthday. Wait until your birthday month or the three months after, and coverage starts the following month.

Miss your seven-month window completely? You'll wait until the General Enrollment Period (January 1 to March 31) and pay late enrollment penalties for as long as you have Medicare Part B. The penalty amount (10% of the Part B premium for each 12-month period of delay) increases the longer you wait, so it's worth getting this right the first time.

Bottom Line

Medicare starts at 65 or earlier if you qualify through a disability and gives you two main coverage pieces: Part A covers hospital stays and won't cost you a dime if you've worked 10 years. Part B handles doctor visits for $185 a month. You've got two paths: stick with Original Medicare and buy drug coverage separately, or choose Medicare Advantage that bundles everything, including dental and vision.

Here's what really matters: you need to sign up in the three months before your birthday through three months after. Miss that window and you'll pay penalties every month for as long as you have Medicare. Those penalties don't disappear, and they add up fast.

Medicare Explained: FAQ

People approaching 65 often have questions about what Medicare is and how it works. We've answered the most frequently asked questions about eligibility, coverage gaps, and costs:

What happens if I miss my Medicare enrollment deadline?

Miss your enrollment window and you'll pay a 10% penalty on your Part B premium for each 12-month period you delayed signing up. These penalties don't expire—they last as long as you have Medicare. You'll also wait until the General Enrollment Period (January 1 to March 31) to sign up, with coverage starting July 1.

Can I have both Medigap and Medicare Advantage?

No, you can't have both plans. You must choose either Original Medicare with Medigap or Medicare Advantage. Medigap only works with Original Medicare to cover copays and deductibles. Medicare Advantage replaces Original Medicare entirely by bundling Parts A, B and usually D with extras like dental and vision coverage.

When does Medicare coverage start after I apply?

Coverage timing depends when you sign up. Apply three months before your 65th birthday and coverage starts on your birthday (or the month before if born on the 1st). Sign up during your birthday month or the three months after, and coverage starts the following month. That's why early application prevents coverage gaps.

What are the three requirements for Medicare?

You qualify for Medicare if you're 65 or older, are a U.S. citizen or permanent resident for at least five years, and have worked at least 40 quarters (10 years) paying Medicare taxes. Some people under 65 also qualify if they receive Social Security Disability Insurance for 24 months or have specific conditions like kidney failure.

What is the downside of Medicare?

Medicare doesn't cover everything you might need. Original Medicare lacks prescription drug coverage, dental care, vision care, and hearing aids. You'll also pay deductibles, coinsurance, and have no annual out-of-pocket maximum. Many people need additional insurance like Medigap or Medicare Advantage plans to fill these coverage gaps.

About Mark Fitzpatrick

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

He writes about economics and insurance, breaking down complex topics so people know what they're buying.

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sources

Medicare.gov. "https://www.medicare.gov/health-drug-plans/part-d/basics/costs." Accessed November 13, 2025.
Medicare.gov. "How does Medicare work?." Accessed November 13, 2025.
Medicare.gov. "When can I sign up for Medicare?." Accessed November 13, 2025.
Medicare.gov. "Working past 65." Accessed November 13, 2025.