Medicare Explained: Parts A, B, C, D, Medigap, and Enrollment

7 min read

Retirement Planning

Medicare is the healthcare backbone of American retirement — and one of the most misunderstood parts of planning. Most people assume it's free and automatic. It's neither. Getting the parts, the costs, and the enrollment windows right can save you thousands and prevent permanent late-enrollment penalties.

The Parts, Decoded

Medicare has four parts, and they cover different things:

Part A (hospital insurance): Inpatient hospital stays, skilled nursing, hospice. Free if you or your spouse paid Medicare taxes for 40+ quarters. Otherwise you pay a premium — $285/month (30–39 quarters) or $518/month (fewer than 30) in 2025.
Part B (medical insurance): Doctor visits, outpatient care, preventive services. Base premium of $185/month in 2025, plus a $257 annual deductible. You generally pay 20% coinsurance after the deductible.
Part C (Medicare Advantage): Private plans that replace Parts A and B, usually bundling drug coverage. Often lower premiums, but with provider networks and prior-authorization rules.
Part D (prescription drugs): Standalone drug coverage if you're on Original Medicare. National base premium ~$36.78/month, with a $590 deductible and a $2,000 out-of-pocket cap on covered drugs.

Medigap (Medicare Supplement)

Original Medicare has no out-of-pocket maximum — your 20% coinsurance is unlimited. Medigap policies (sold by private insurers) cover that gap. They're standardized (Plan G is the most common), but you have the most flexibility to buy one — without medical underwriting — during your Medigap Open Enrollment window: the six months after you turn 65 and enroll in Part B.

This is why many advisors prefer Original Medicare + Medigap + Part D over Advantage: no networks, no prior authorizations, predictable costs. Advantage has lower upfront premiums but can cost more when you actually get sick.

The Enrollment Windows

The dates matter, because missing them triggers permanent penalties:

Initial Enrollment Period (IEP): The seven-month window around your 65th birthday (three months before, your birthday month, three months after). This is the main door in.
General Enrollment Period: January 1 – March 31, if you missed your IEP. Coverage starts July 1 — and you may owe a late penalty: Part B goes up 10% for each full 12-month period you should have had it but didn't, for life.
Special Enrollment Periods: If you have employer coverage and delay Medicare, you get an 8-month window after the job or coverage ends to enroll penalty-free. Don't confuse "I have coverage" with "I don't need to sign up" — the rules are specific.
Open Enrollment (Oct 15 – Dec 7): An annual window to change Advantage or Part D plans.

The High-Income Surcharge: IRMAA

Medicare isn't the same price for everyone. If your income two years prior was above $103,000 (single) / $206,000 (married), you pay an income-related monthly adjustment amount (IRMAA) — an extra charge on top of Part B and Part D premiums. In 2025 the highest tier (income above $500,000 single / $750,000 married) pays $628.90/month for Part B instead of $185.

This is a tax-planning issue disguised as an insurance one: realizing a large capital gain or doing a big Roth conversion at age 63 can spike your income and raise your Medicare premiums at age 65. Planning income before 65 matters.

What Medicare Doesn't Cover

Medicare does not cover most dental, vision, hearing, or long-term care. Those require separate insurance or out-of-pocket savings — which is exactly why our guides on long-term care and HSAs matter. Many retirees are surprised that their biggest healthcare costs in retirement aren't covered by the program they've been paying into for 40 years.

The Bottom Line

Budget for the premiums (Part B $185/month + Medigap + Part D), respect the enrollment windows, and plan your income around IRMAA thresholds if you're a higher earner. Medicare is a good deal, but it's not free, not automatic, and not comprehensive.