Whether you’re turning 65 soon, newly eligible for Medicare, or reviewing your coverage during Open Enrollment, understanding how Medicare works is one of the most important steps in protecting your health and finances. There are multiple parts, deadlines, and decisions to make and missing one could lead to higher costs or gaps in coverage.

The good news? Once you understand the basics, Medicare isn’t nearly as complicated as it seems. This guide walks you through the essentials — what each part covers, when to enroll, and how to make confident decisions that align with your health and financial goals.

A Quick Overview: What Is Medicare?

Part A – Hospital Insurance

Part A is your hospital insurance. It helps pay for inpatient hospital stays, skilled nursing facility care, hospice, and some limited home health services.

If you or your spouse worked and paid Social Security taxes for at least ten years, you’ll likely receive Part A premium-free. But “free” doesn’t mean no cost at all — there are still deductibles and coinsurance if you need extended hospital or facility care.

If you’re already receiving Social Security, you’ll be enrolled automatically when you turn 65. Otherwise, you’ll need to apply through the Social Security Administration.

Part B – Medical Insurance

Part B covers your outpatient care - doctor visits, lab work, preventive services, and durable medical equipment.

The standard premium in 2025 is $185 per month, but higher-income individuals pay an additional surcharge called IRMAA (Income-Related Monthly Adjustment Amount), which Medicare calculates using your tax return from two years ago. That means your 2023 modified adjusted gross income determines what you’ll pay for your 2025 premiums.

If your income has dropped since then — for example, because you retired — you can ask Social Security to reconsider your IRMAA amount and potentially lower your premium.

If your employer is smaller, or you’re covered through retiree or COBRA insurance, you’ll need to enroll in Part B when you turn 65 to avoid penalties and ensure your claims are paid correctly.

Part C – Medicare Advantage

Part C, known as Medicare Advantage, offers an alternative way to receive your Medicare benefits. These plans are provided by private insurance companies approved by Medicare and typically include all the services in Parts A and B, plus extras such as prescription drug coverage, dental, vision, or hearing benefits.

Advantage plans often have lower upfront premiums, but you’ll usually need to use in-network providers and may have copays or referral requirements. It’s convenient - one card, one insurer - but flexibility is limited.

It’s also important to know that you cannot have a Medigap policy if you’re enrolled in a Medicare Advantage plan.

Part D – Prescription Drug Coverage

Part D is Medicare’s prescription drug coverage, offered by private insurers. Plans vary by price and which drugs they cover, so it’s worth comparing options carefully.

Even if you’re not taking medications right now, enrolling in Part D when you’re first eligible is smart. Without it, unless you have proof of creditable drug coverage from another plan, you could face a permanent late-enrollment penalty that gets added to your premiums for life.

Medigap (Supplemental Insurance)

Original Medicare (Parts A and B) doesn’t cover everything - and that’s where Medigap (also called Medicare Supplement Insurance) comes in.

Sold by private insurers, Medigap policies help pay for what Medicare doesn’t — like deductibles, copayments, and coinsurance. Some plans even cover emergency care abroad.

You must have both Part A and Part B to buy a Medigap policy, and you can’t have one if you’re enrolled in Medicare Advantage. Plans are standardized by letter (A through N), and while prices differ among insurers, the coverage for each lettered plan is identical.

How Medicare Fits with Other Coverage

When you turn 65, Medicare usually becomes your primary health insurance, and most other plans - like individual policies, small employer coverage, or retiree health benefits - pay secondary.

That means if you don’t enroll when required, your medical claims could be denied, and you may face lifetime late penalties.

The only major exception is if you (or your spouse) are still actively working for an employer with 20 or more employees and covered by that group plan. In that case, you can delay Medicare enrollment without penalty. Once that coverage ends, you’ll have eight months to enroll in Parts A and B under what’s called a Special Enrollment Period.

COBRA and Retiree Plans Don’t Count

This rule trips up a lot of people: COBRA and retiree health coverage are not considered active employment for Medicare purposes.

If you’re on COBRA after turning 65, you must still enroll in Medicare Parts A and B. Otherwise, Medicare may not pay your claims, and penalties can apply.

Health Savings Account Contributions After 65

Here’s another common mistake. Once you enroll in Medicare Parts A or B, you can no longer contribute to a Health Savings Account.

The only way to continue HSA contributions after age 65 is to stay on a qualifying employer plan with 20 or more employees and delay both Medicare and Social Security enrollment. Signing up for Social Security automatically enrolls you in Part A, so timing matters.

Keep Proof of Prior Coverage

If you’re delaying Medicare or Part D because you have other qualifying coverage, keep written proof of that coverage. Medicare may ask for it later to confirm your plan met the “creditable” standard and to waive late penalties.

Enrollment Periods: Timing Is Everything

Understanding when you can sign up is just as important as knowing what you’re signing up for. Missing your window can lead to higher premiums for life - so here are the key enrollment periods to remember.

Initial Enrollment Period

Your initial enrollment begins three months before the month you turn 65, includes your birthday month, and ends three months after.

For example, if your birthday is June 15, your enrollment period runs from March 1 through September 30.

This is your best opportunity to sign up for Parts A and B (and add Part D or Medigap if needed) without penalties.

General Enrollment Period

If you miss your initial window, you can sign up between January 1 and March 31 each year. Your coverage will begin July 1, but a late-enrollment penalty may apply - making timely action important.

Open Enrollment Period

Each year, from October 15 to December 7, Medicare’s Open Enrollment allows you to review and change your coverage. You can switch from Original Medicare to Medicare Advantage (or vice versa) or update your Part D plan.

If you make changes during this period, your new coverage takes effect January 1.

Additionally, if you’re already in a Medicare Advantage plan, you have another window from January 1 through March 31 to switch plans or return to Original Medicare.

Special Enrollment Period

If you’re still working at 65 and covered under an employer or union group health plan, you can delay Medicare enrollment without penalty.

Once your job or coverage ends, you’ll have an eight-month Special Enrollment Period to sign up for Parts A and B.

It’s important to note that COBRA and retiree health plans don’t count as active employer coverage for this rule — a detail that trips up many retirees.

What Will It Cost?

• Part A: Usually free if you qualify for Social Security, though deductibles and coinsurance still apply.

• Part B: $185/month in 2025 (higher for those with greater income).

• Part C and D: Vary by plan and coverage.

• Medigap: Premiums depend on your age, location, and insurer.

While costs vary, Medicare remains one of the most cost-effective ways to ensure quality health coverage in retirement — especially when paired with the right supplemental or Advantage plan.

Why Reviewing Your Plan Each Year Matters

Nearly 70% of Medicare beneficiaries don’t review their coverage annually and many end up paying more than they need to. Plans change their premiums, formularies, and provider networks every year. A quick annual review can prevent surprises, reduce out-of-pocket costs, and ensure your coverage continues to fit your needs.

Common Mistakes to Avoid

A few simple missteps can make Medicare more expensive or more stressful than it needs to be. Here are some of the biggest ones to watch out for:

• Relying on COBRA or retiree insurance and delaying Medicare enrollment. These don’t count as active employer coverage once you turn 65, which can lead to unpaid claims or late penalties.

• Missing your Initial Enrollment Period. That seven-month window around your 65th birthday is your best chance to enroll without lifetime penalties.

• Forgetting to stop HSA contributions after enrolling in Medicare. Once you’re covered by any part of Medicare, new HSA contributions aren’t allowed.

• Assuming your drug coverage is “creditable.” Always confirm that your existing plan meets Medicare’s standard to avoid a permanent Part D penalty later.

• Skipping your annual plan review. Medicare plans change each year - premiums, drug lists, and provider networks. Taking a few minutes each fall to review your options can save you hundreds.

Takeaway: Medicare isn’t hard to manage once you know the rules - but a little attention to timing and details can protect you from costly mistakes and make your transition much smoother.

Final Thoughts: Prepare Early, Avoid Stress

Medicare can feel like alphabet soup - A, B, C, D, and even Medigap - but once you understand how the pieces fit, it becomes much easier to manage.

If you’re turning 65 soon or helping a spouse make the transition, it’s wise to start the process early. Review your current coverage, compare available plans, and mark your key enrollment dates on your calendar to avoid costly penalties.

The best plan isn’t always the cheapest one - it’s the one that fits your health needs, lifestyle, and financial goals. Coordinating Medicare with other insurance, retirement income, and travel plans can make a meaningful difference in both cost and convenience.

In the end, a little preparation goes a long way toward peace of mind - knowing your healthcare coverage is secure and built to support you in the years ahead.