Medicare Explained: How Parts A, B, C, and D Work in 2026

What Is Medicare and How Does It Work?

Medicare is the federal health insurance program for Americans age 65 and older, along with people who qualify due to disability or certain medical conditions. It's administered by the Centers for Medicare & Medicaid Services (CMS) and funded through payroll taxes, premiums, and general federal revenue.

Medicare works by splitting coverage into distinct "parts," each handling a different type of care. You then choose one of two overall paths:

  1. Original Medicare — Part A + Part B, run directly by the federal government, usually paired with a standalone Part D drug plan and optionally a Medigap supplement.

  2. Medicare Advantage — Part C, an ‘all-in-one’ alternative run by private insurers under contract with Medicare, typically bundling hospital, medical, and drug coverage plus extras like dental and vision.

There is no universally "better" option. The right path depends on your doctors, health needs, budget, travel & more. That's a decision worth walking through with a licensed local advisor rather than guessing.

Medicare Part A: Hospital Insurance Explained

What it covers: Inpatient hospital stays, skilled nursing facility care, hospice care, and limited home health care.

2026 Part A costs:

  • Premium: $0/month for most people with at least 40 quarters (10 years) of Medicare-taxed work history. Those with 30–39 quarters pay $311/month; fewer than 30 quarters pay $565/month.

  • Deductible: $1,736 per benefit period.

  • Hospital coinsurance: $0 for days 1–60; $434/day for days 61–90; $868/day for lifetime reserve days.

  • Skilled nursing facility coinsurance: $217/day for days 21–100.

Common question — is Part A free? For most people, yes — if you or a spouse paid Medicare taxes for at least 10 years, Part A comes with no monthly premium. You'll still owe the deductible and coinsurance if you're actually hospitalized.

Medicare Part B: Medical Insurance Explained

What it covers: Doctor visits, outpatient care, preventive screenings, durable medical equipment, ambulance services, and mental health services.

2026 Part B costs:

  • Standard premium: $202.90/month.

  • Annual deductible: $283.

  • Coinsurance: 20% of the Medicare-approved amount for most services after the deductible is met.

Common question — why did my Part B premium go up? Part B premiums are recalculated annually by CMS based on projected program costs. The 2026 standard premium rose to $202.90 from $185.00 in 2025.

Common question — what is IRMAA? IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge added to your Part B and Part D premiums if your income is above a certain threshold, based on your tax return from two years prior. In 2026, IRMAA surcharges range from roughly $14.50 to $91/month depending on income bracket. This is one of the most overlooked planning issues for retirees with pensions, investment income, or a Roth conversion strategy — timing income in the years before Medicare eligibility can materially affect your premiums.

Medicare Part C (Medicare Advantage) Explained

What it covers: Everything Original Medicare (Parts A and B) covers, plus — in most plans — prescription drugs, dental, vision, and hearing benefits.

2026 Medicare Advantage costs:

  • Average premium: Many plans in Colorado are available at $0/month (you still pay your Part B premium regardless).

  • Trade-off: Lower monthly costs and added benefits, in exchange for a defined network of doctors and hospitals, and potentially higher costs if you need significant care in a given year.

Common question — is Medicare Advantage the same as Medicare? Medicare Advantage is an alternative way to receive your Medicare benefits, run by private insurers instead of the federal government directly. It must cover at least what Original Medicare covers, but the cost-sharing structure, provider network, and extra benefits vary significantly by plan and by county.

Medicare Part D: Prescription Drug Coverage Explained

What it covers: Prescription medications, through either a standalone plan (if you have Original Medicare) or bundled into a Medicare Advantage plan.

2026 Part D costs:

  • Average standalone premium: around $34.50/month.

  • Maximum deductible: $615.

  • Out-of-pocket cap: $2,100 — once you hit this in covered drug costs for the year, you pay $0 for the remainder of the year.

  • Insulin cap: $35/month across all Part D plans, regardless of deductible status.

Common question — what happens if I don't sign up for Part D when I'm first eligible? If you go without creditable drug coverage for 63 days or more after your Initial Enrollment Period, you may face a permanent late-enrollment penalty added to your premium for as long as you have Part D coverage.

Medicare Supplement (Medigap): Filling the Gaps in Original Medicare

If you choose Original Medicare, a Medigap policy can cover the coinsurance, copays, and deductibles that Parts A and B leave behind. Medigap plans are standardized by letter (Plan G, Plan N, etc.), meaning the benefits are identical no matter which insurance company sells them — only the premium differs. This makes comparing carriers on price, not just coverage, one of the most valuable things a licensed agent can do for you.

Medicare Enrollment Periods: When Can You Sign Up?

  • Initial Enrollment Period (IEP): A 7-month window centered on your 65th birthday — 3 months before, your birthday month, and 3 months after.

  • Annual Enrollment Period (AEP): October 15 – December 7 each year. Switch between Medicare Advantage and Original Medicare, or change your Part D plan, effective the following January 1.

  • Medicare Advantage Open Enrollment Period (MA OEP): January 1 – March 31. If you're already in a Medicare Advantage plan, you can make one plan change during this window.

  • Special Enrollment Periods (SEP): Triggered by qualifying life events, such as losing employer coverage or moving out of your plan's service area.

Common question — what happens if I miss my Initial Enrollment Period? Missing your IEP without other creditable coverage can trigger permanent late-enrollment penalties on both Part B and Part D, and may limit when you're next able to enroll. Timing this correctly is one of the most common — and most costly — mistakes people make.

How to Choose the Right Medicare Coverage for You

The right combination of Parts A, B, C, D, and Medigap depends on a handful of personal factors:

  • Which doctors and hospitals you want to keep seeing

  • How many prescriptions you take, and which ones

  • How often you travel, and whether you split time between states

  • Your budget for predictable monthly premiums versus unpredictable out-of-pocket costs

  • Broader retirement income planning, including how Medicare premiums interact with Social Security timing, pension income, and IRMAA thresholds

Because these pieces interact — and because plans and costs can change every year — most people benefit from sitting down with a licensed, local advisor rather than piecing together an answer from national websites alone.

Frequently Asked Questions

How does Medicare work in simple terms? Medicare is federal health insurance split into Part A (hospital), Part B (medical), Part C (private-insurer alternative to A+B), and Part D (drugs). You choose either Original Medicare (A+B, plus optional D and Medigap) or a Medicare Advantage plan (C) that bundles most of this together.

What's the difference between Medicare Advantage and Medicare Supplement? Medicare Advantage (Part C) replaces Original Medicare with a private-insurer plan that includes a provider network. A Medicare Supplement (Medigap) instead works alongside Original Medicare to cover its cost-sharing gaps — you keep Original Medicare and can generally see any doctor who accepts it.

How much does Medicare cost per month in 2026? Part B alone is $202.90/month for most people in 2026. Add-on costs depend on your path: Medicare Advantage premiums average around $14/month (often $0), standalone Part D plans average about $34.50/month, and Medigap premiums vary by plan letter and carrier.

Do I need a Medicare Supplement if I have Medicare Advantage? No — Medigap policies are designed to work with Original Medicare and generally cannot be used alongside a Medicare Advantage plan.

When is the best time to enroll in Medicare? For most people, the safest time is during your 7-month Initial Enrollment Period around your 65th birthday, to avoid late-enrollment penalties on Part B and Part D.

Talk to a Licensed Medicare Advisor in Grand Junction

Every situation is different, and national averages only get you so far. If you'd like help comparing your actual options in Grand Junction and across the Western Slope, schedule a free, no-obligation Medicare consultation today.

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This page is for educational purposes and does not constitute a recommendation of any specific plan. We are not connected with or endorsed by the U.S. government or the federal Medicare program.