What Is Medicare? Eligibility, Enrollment, and Coverage

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Medicare is the federal health insurance program in the United States for people age 65 and older, plus certain younger people with long-term disabilities, permanent kidney failure (end-stage renal disease) or amyotrophic lateral sclerosis (ALS). It is funded mainly through payroll taxes, run by the Centers for Medicare and Medicaid Services (CMS), and split into parts that cover hospital care, outpatient care, private plan alternatives and prescription drugs. It is not free, and it does not pay for everything. Most enrollees pay a monthly premium for at least one part, plus deductibles and coinsurance when they use care.

What Is Medicare?

Medicare is government health insurance tied to age or disability rather than to income or employment. A 66-year-old retiree and a 40-year-old who has collected disability benefits for two years can both be covered by the same program, while a low-income 30-year-old would normally look to Medicaid instead.

The program is organized into “parts,” and each one has its own coverage, enrollment rules and costs. Coverage is per person. Unlike an employer health plan, Medicare has no family coverage: a spouse or child has to qualify independently, based on their own age or disability. Only the work record that earns premium-free Part A can be shared with a spouse.

How Medicare Works

Funding and administration

Medicare is administered by CMS, a federal agency within the Department of Health and Human Services. Its main funding source is the Medicare payroll tax collected under the Federal Insurance Contributions Act (FICA). Workers pay 1.45% of wages and employers match it, for 2.9% in total. Self-employed people pay the full 2.9%, and an additional 0.9% Medicare tax applies to earnings above set thresholds. Those payroll contributions earn workers premium-free Part A later. Part B and Part D are financed largely by enrollee premiums and federal general revenue.

Automatic vs. manual enrollment

If you are already receiving Social Security or Railroad Retirement Board (RRB) benefits when you turn 65, you are enrolled in Parts A and B automatically and your Medicare card arrives by mail. You can decline Part B if you have other qualifying coverage. People who have received Social Security Disability Insurance (SSDI) for 24 months are also enrolled automatically.

If you are not yet collecting Social Security at 65 (common for people who delay benefits to get a larger check), you must apply, usually through the Social Security Administration. Part D drug coverage, Medicare Advantage and Medigap are never automatic. You choose and enroll in those yourself.

Enrollment periods

1. Initial Enrollment Period: seven months around your 65th birthday, running from three months before your birthday month, through that month, to three months after.
2. General Enrollment Period: January 1 to March 31 each year, for people who missed their initial window and have no special enrollment right.
3. Open Enrollment Period: October 15 to December 7 each year, when you can switch between Original Medicare and Medicare Advantage or change Part D plans. Changes take effect January 1.
4. Medicare Advantage Open Enrollment: January 1 to March 31, when people already in a Medicare Advantage plan can switch plans or return to Original Medicare.
5. Special Enrollment Periods: triggered by specific events, such as losing employer coverage based on current work.

Late penalties. The Part B premium rises 10% for each full 12-month period you could have had Part B but didn’t, and the surcharge generally lasts as long as you have Part B. The Part D penalty adds 1% of the national base beneficiary premium for each month you went without Part D or other creditable drug coverage. People covered by an employer plan based on active work can usually delay without penalty.

Who Is Eligible for Medicare?

At age 65

U.S. citizens and lawful permanent residents who have lived in the country for at least five consecutive years can get Medicare at 65. Whether Part A costs anything depends on work history. You qualify for premium-free Part A at 65 if any of these apply:

• You receive, or are eligible for, Social Security or RRB benefits.
• Your spouse (living or deceased, and in some cases a divorced spouse) receives or is eligible for those benefits.
• You or your spouse worked in government employment long enough while paying Medicare taxes.
• You are the parent of a deceased child who was fully insured under Social Security.

The usual work threshold is 40 quarters of Medicare-covered employment, roughly 10 years. People who fall short can still buy Part A by paying a monthly premium. Anyone age 65 or older who is a citizen or a qualifying long-term resident can buy Part B, even without premium-free Part A.

Under age 65

Younger people can qualify for premium-free Part A if they:

• Have received SSDI benefits for at least 24 months
• Receive an RRB disability pension and meet Medicare’s conditions
• Have ALS and receive SSDI (the 24-month wait does not apply)
• Have end-stage renal disease requiring dialysis or a kidney transplant, and have enough work credits themselves or through a spouse or parent
• Worked long enough in Medicare-covered government employment and have met SSDI disability requirements for 24 months
• Are a disabled child or a disabled surviving or divorced spouse (age 50 or older) of a qualifying worker, and meet SSDI requirements

The Parts of Medicare

Part A: hospital insurance

Part A pays for inpatient hospital stays, care in a skilled nursing facility after a qualifying hospital stay, hospice care and some home health care. It does not pay for long-term custodial care.

Part A costs are charged per benefit period, not per calendar year. A benefit period starts when you are admitted as an inpatient and ends after you have gone 60 consecutive days without inpatient hospital or skilled nursing care. A new admission after that point starts a new period with a new deductible, so a person can owe the deductible more than once in a year. Skilled nursing coverage requires a qualifying inpatient hospital stay first (generally three days). The first 20 days carry no coinsurance, and days 21 to 100 carry a daily copayment. Medicare also provides 60 lifetime reserve days for hospital stays beyond day 90 of a benefit period. Once those days are used, they do not renew.

Part B: medical insurance

Part B covers outpatient care: doctor visits, outpatient procedures, lab tests, preventive services and screenings, ambulance transport, durable medical equipment and outpatient mental health care. For 2026, the standard monthly premium is $202.90 and the annual deductible is $283. After the deductible, you generally pay 20% coinsurance of the Medicare-approved amount for most services.

Higher earners pay more through an income-related monthly adjustment amount (IRMAA) based on modified adjusted gross income (MAGI) from the tax return filed two years earlier. For 2026, surcharges begin above $109,000 for single filers and $218,000 for married couples filing jointly. Original Medicare has no annual out-of-pocket maximum on that 20% coinsurance. That gap is the main reason people buy Medigap or choose Medicare Advantage.

Part C: Medicare Advantage

Medicare Advantage plans are sold by private insurers approved by Medicare. They replace Original Medicare as the way your benefits are delivered, and you keep paying the Part B premium. Plans must cover everything Original Medicare covers. Many include an annual out-of-pocket limit, drug coverage, and extras such as dental, vision and hearing benefits.

Watch for the trade-offs. Medicare Advantage plans typically use HMO or PPO networks and may require prior authorization for some services, so your choice of doctors and hospitals can be narrower than under Original Medicare, which any provider that takes Medicare accepts nationwide. You can return to Original Medicare during the enrollment windows, but buying a Medigap policy then may require medical underwriting in many states, and an insurer can charge more or decline coverage.

Part D: prescription drug coverage

Part D is optional drug coverage sold through private plans, either as a stand-alone plan added to Original Medicare or bundled into a Medicare Advantage plan. Anyone enrolled in Part A or Part B can join. Each plan has its own premium, deductible, list of covered drugs (formulary) and cost-sharing tiers. CMS put the average stand-alone base premium at $34.50 per month for 2026. That figure reflects basic benefits only, and actual premiums vary by plan.

The Inflation Reduction Act of 2022 changed Part D in several ways that phased in during 2023 to 2025:

• Covered insulin costs no more than $35 per month.
• Recommended adult vaccines carry no cost-sharing.
• The low-income subsidy (Extra Help) expanded to 150% of the federal poverty level.
• Annual out-of-pocket drug spending is capped. The cap was $2,000 in 2025 and is $2,100 for 2026.

Medigap: supplement insurance

Medicare Supplement Insurance (Medigap) is private coverage that works alongside Original Medicare. It pays some or all of the deductibles, coinsurance and copayments that Parts A and B leave to you. Plans are standardized and identified by letters, so the same lettered plan carries the same benefits from any insurer, though premiums differ. Your strongest buying window is the six-month Medigap open enrollment period that begins the month you are 65 or older and enrolled in Part B. During that window, insurers cannot deny you or charge more because of your health. Medigap cannot be paired with Medicare Advantage, and it does not include drug coverage.

Example: What Original Medicare Leaves You to Pay

Hypothetical example, using the 2026 amounts above and assuming Original Medicare with no Medigap policy, no prior spending toward deductibles, and in-network Medicare-approved charges.

A 70-day hospital stay (Part A). You owe the $1,736 deductible, which covers days 1 to 60. Days 61 to 70 cost $434 each, or 10 × $434 = $4,340. Your Part A share comes to $1,736 + $4,340 = $6,076. If the stay ran past day 90, each additional day would draw on lifetime reserve days at $868 per day.

A $1,000 outpatient procedure (Part B). You pay the first $283 (the annual deductible). Of the remaining $717, you pay 20%, which is $143.40. Your share totals $426.40, and Medicare pays $573.60. A doctor who does not accept Medicare assignment can charge more than the approved amount, within limits, which would raise your share.

Over the same year, you would also have paid 12 × $202.90 = $2,434.80 in standard Part B premiums, before any IRMAA surcharge, Part D premium or Medigap premium. With a Medigap plan that covers these cost-sharing items, most of the $6,076 and $426.40 would shift to the insurer in exchange for that policy’s monthly premium.

What Medicare Does Not Cover

The largest gap is long-term custodial care: ongoing help with daily activities in a nursing home, assisted living facility or at home when skilled care is not needed. Medicaid may pay for custodial care for people who meet its income and asset limits, and private long-term care insurance is another option. Original Medicare also generally excludes:

• Routine eye exams and eyeglasses
• Most dental care and dentures
• Hearing aids and exams for fitting them
• Most medical care received outside the U.S.
• Cosmetic surgery
• Massage therapy

Is Medicare Free?

Only partly. Part A is premium-free for people with enough Medicare-taxed work history of their own or through a spouse. Others pay a monthly Part A premium. Part B always carries a premium, Part D, Medigap and many Medicare Advantage plans charge their own, and deductibles and coinsurance apply on top. People with limited income and savings may get help through state-run Medicare Savings Programs, which can pay Part B premiums, and through Extra Help for drug costs.

People who stop working before 65 have no Medicare coverage until eligibility begins, so health insurance becomes a separate cost to plan for, a recurring issue in early retirement under the FIRE approach.

How much is taken from a Social Security check?

If you receive Social Security benefits, your Part B premium, plus any IRMAA surcharge, is normally deducted from your monthly payment automatically. Premium-free Part A takes nothing. Part D and Medicare Advantage premiums can also be withheld from the check if you choose that option with your plan. Otherwise, you pay the plan directly.

Medicare vs. Medicaid and Other Common Confusions

Medicare vs. Medicaid. Both programs were created by the same 1965 law, but they serve different people. Medicare is federal and based on age or disability, regardless of income. Medicaid is a joint federal and state program for people with low income (and, for some categories, limited assets), and unlike Medicare it can cover long-term custodial care. People who qualify for both are called dual eligibles, and Medicaid then helps with Medicare’s premiums and cost-sharing.

Medicare vs. Social Security. Social Security pays cash benefits. Medicare pays for health care. The two are linked because Social Security handles most Medicare enrollment, collecting Social Security triggers automatic Medicare enrollment at 65, and Part B premiums come out of benefit checks. Medicare starts at 65, while Social Security full retirement age is later for most people now retiring, so some people take Medicare without yet collecting Social Security.

Original Medicare vs. Medicare Advantage. Original Medicare is the federal program paying providers directly, accepted nationwide by participating providers, with no out-of-pocket cap. Medicare Advantage is a private plan delivering the same core benefits, usually with networks and an annual cost limit. You pick one or the other, and a Medigap policy works only with Original Medicare.

The History of Medicare

President Lyndon B. Johnson signed the law creating Medicare and Medicaid in 1965. The original program consisted of Part A (Hospital Insurance) and Part B (Medical Insurance), which is why those two parts are still called Original Medicare. Congress has widened the program several times since:

• 1972: Eligibility expanded to people with long-term disabilities and those with end-stage renal disease, and people 65 and older without enough work history were allowed to buy in.
• 2003: The Medicare Prescription Drug, Improvement, and Modernization Act established Medicare Advantage (Part C) and created the optional Part D drug benefit, which started in 2006.
• 2020: The CARES Act expanded Medicare coverage of COVID-19 treatment and broadened telehealth coverage.
• 2022: The Inflation Reduction Act redesigned Part D cost-sharing.

FAQs

The Bottom Line

People nearing 65, and younger people who have received SSDI for 24 months, should track enrollment windows closely, since late Part B and Part D sign-ups bring lasting penalties. Original Medicare leaves real cost gaps, so the practical choice is between adding Medigap, ideally during its six-month open enrollment, and choosing a Medicare Advantage plan with its networks and annual cost limit. Long-term custodial care needs separate planning through Medicaid or private insurance.