Medicare is one of the most important federal health insurance programs in the United States. It is administered by the federal government and funded through a combination of Medicare payroll taxes, federal revenues, and premiums paid by beneficiaries.
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If you or a loved one lives in the United States—or is planning for retirement—understanding how Medicare works can help you prepare more confidently for future health care needs and expenses.
What is Medicare?
Medicare is a federal health insurance program in the United States for people age 65 and older, certain younger people with qualifying disabilities, and people with certain medical conditions as defined by Medicare rules.
The purpose of Medicare is to help eligible individuals manage health care costs as they grow older or live with certain qualifying disabilities or medical conditions.
Unlike Medicaid, Medicare is not necessarily free health insurance. Depending on the coverage they choose and the services they receive, enrollees may still have to pay premiums, deductibles, copays, or coinsurance.
What are the different parts of Medicare?
To meet different health care needs, Medicare is divided into four parts, each serving a different purpose. People can choose or combine different types of coverage depending on their health needs and financial situation.
- Part A: Hospital care and certain related services.
- Part B: Medical insurance for outpatient care.
- Part C (Medicare Advantage): An alternative way to receive Medicare benefits through a private insurance company approved by Medicare.
- Part D: Prescription drug coverage.
Medicare was not created in its current form all at once. When the program began in 1965, it included only Part A and Part B, known today as Original Medicare. In the decades that followed, Congress added Part C and Part D to better meet the changing needs of older adults.
Original Medicare
Medicare Part A
Part A primarily covers services such as inpatient hospital care, certain skilled nursing facility care when eligibility requirements are met, some hospice care, and certain home health care services.
For most people who have worked and paid Medicare taxes long enough—usually about 10 years—Part A does not require a monthly premium.
Medicare Part B
Part B primarily covers many outpatient medical services, including doctor visits, specialist visits, lab tests, diagnostic imaging, certain preventive services, and durable medical equipment.
Unlike Part A, most people enrolled in Medicare Part B must pay a monthly premium. The standard premium is adjusted each year by the federal government. For example, the standard Medicare Part B premium in 2026 is $202.90 per month. Higher-income beneficiaries may also have to pay an additional amount called IRMAA, or the Income-Related Monthly Adjustment Amount.
If you are already receiving Social Security benefits, this premium is typically deducted directly from your monthly benefit payment.
In many cases, Original Medicare—Parts A and B—covers a significant share of a person’s health care costs.
However, Original Medicare does not pay for everything. Beneficiaries may still be responsible for deductibles, copays, coinsurance, and prescription drug costs.
That is why many people choose to buy a Medigap policy to help reduce out-of-pocket costs, add Part D prescription drug coverage, or enroll in a Medicare Advantage plan, depending on their needs.
Medicare Part D
Part D is Medicare’s prescription drug coverage. It can be purchased as a stand-alone plan or included in some Medicare Advantage plans.
If you regularly take medications for chronic conditions such as high blood pressure, diabetes, heart disease, or high cholesterol, Part D may help lower your prescription drug costs.
Even if you do not currently take many prescription medications, you should carefully consider whether to delay Part D enrollment. If you go 63 days or more without Part D or other creditable prescription drug coverage after becoming eligible, you may have to pay a late enrollment penalty when you enroll later.
Medicare Advantage (Part C)
Medicare Advantage plans are offered by private insurance companies approved by Medicare to provide provide Medicare benefits.
These plans generally include Part A benefits, Part B benefits, and often Part D prescription drug coverage. Some plans also offer extra benefits such as dental care, vision care, hearing aids, wellness programs, and other benefits depending on the specific plan.
Because of these added benefits, Medicare Advantage has become an increasingly popular choice.
The cost of Medicare
Although Medicare can significantly reduce health care costs, beneficiaries may still have to pay certain expenses depending on the coverage they choose and the services they use.
- Part A: Most people do not pay a premium if they qualify.
- Part B: Most people pay a monthly premium.
- Part C: Depending on the plan, there may be no additional premium or there may be an extra monthly premium.
- Part D: Costs vary by prescription drug plan.
One important point to remember is that enrolling in Medicare Advantage does not replace or cancel Medicare Part A and Part B. To join a Medicare Advantage plan, you generally must have both Part A and Part B, and you must continue paying the Part B premium. Some Medicare Advantage plans charge an additional premium, while many others do not.
In addition to premiums, people with Medicare may still have to pay deductibles, copays, or coinsurance when they receive medical services.
Does Medicare cover long-term care?
Medicare primarily covers medical care and treatment. It generally does not cover long-term care services that are mainly intended to help with daily living activities, often called custodial care.
In many cases, Medicaid is the main program that helps pay for long-term care services if a person meets the eligibility requirements.
Original Medicare or Medicare Advantage?
Original Medicare generally allows beneficiaries to use any doctor or hospital in the United States that accepts Medicare, offering broad flexibility in choosing providers. However, it does not cover all costs and does not include prescription drug coverage. For that reason, many people add Part D or purchase a Medigap policy to help reduce out-of-pocket expenses.
Medicare Advantage, on the other hand, often combines multiple benefits into one plan and may include additional services such as dental or vision coverage. However, these plans usually have their own network of doctors and hospitals.
The right choice depends on your health condition, how often you use medical services, your budget, and where you live.
Can immigrants qualify for Medicare?
Some immigrants, including lawful permanent residents who meet Medicare’s citizenship or residency requirements, may be eligible to enroll. Eligibility also depends on factors such as age, disability status, length of lawful residence, and work history.
For example, someone who moves to the United States later in life and has not worked long enough to qualify for premium-free Part A may have to pay a premium if they want to enroll in Medicare Part A.
Key takeaways
- Medicare is a health insurance program mainly for people age 65 and older, as well as certain other eligible groups.
- Part A mainly covers inpatient hospital care.
- Part B mainly covers outpatient medical care.
- Original Medicare, which includes Part A and Part B, covers many medical needs but does not pay for everything.
- Part D helps cover prescription drugs.
- Medicare Advantage, or Part C, is an alternative way to receive Medicare benefits through private insurance companies approved by Medicare.
- Medicaid and Medicare are different programs. Medicaid often plays a larger role in paying for long-term care services.
The table below summarizes the main parts of Medicare.
| Part | What it covers | Premium |
| Part A | Inpatient hospital care and certain related care services | Usually premium-free if you qualify |
| Part B | Outpatient medical care and other medical services | Usually requires a monthly premium |
| Part C | Medicare benefits provided through a private insurance company; many plans include additional benefits | May or may not have an additional premium |
| Part D | Prescription drugs | Varies by plan |