Understanding Medicare

A plain-language guide for people turning 65, newly retired, or simply trying to make sense of their options — from a local Medicare advisor in the Rio Grande Valley.

What Is Medicare?

Medicare is the federal health insurance program created by the U.S. government in 1965. It was designed to provide health coverage for Americans age 65 and older, as well as certain younger people living with disabilities or specific medical conditions such as End-Stage Renal Disease (ESRD) or ALS.

Unlike private health insurance you may have had through an employer, Medicare is not tied to your job. Once you become eligible, you carry it for life — regardless of where you live, whether you are still working, or what your health history looks like.

Medicare does not cover everything, and it works differently depending on which parts of the program you enroll in. That is why understanding each piece is so important before you make any decisions.

Original Medicare: Parts A and B

When people refer to “Original Medicare,” they mean Parts A and B — the two foundational pieces of the program that work together to cover hospital and medical expenses.

Medicare Part A — Hospital Insurance

Part A covers inpatient hospital care, skilled nursing facility stays (after a qualifying hospital stay), hospice care, and some home health services. Most people do not pay a monthly premium for Part A because they — or their spouse — paid Medicare taxes for at least 10 years while working. This is often referred to as having “premium-free Part A.”

However, Part A does come with a deductible. In 2026, the Part A hospital deductible is $1,676 per benefit period. This is not an annual deductible — it resets each time you are admitted for a new inpatient stay after a break of at least 60 days, which means you could potentially face this deductible more than once in a year if you are hospitalized multiple times.

Medicare Part B — Medical Insurance

Part B covers outpatient services — things like doctor visits, lab work, preventive screenings, physical therapy, mental health services, and medically necessary equipment. Most Medicare beneficiaries pay a standard monthly premium for Part B. In 2026, the standard Part B premium is $185.00 per month.

Part B also has an annual deductible of $257 in 2026. After that deductible is met, you typically pay 20% of the Medicare-approved amount for covered services. That 20% is called coinsurance, and if you are receiving frequent medical care, it can add up quickly — which is why many people choose supplemental coverage on top of Original Medicare.

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The Four Parts of Medicare at a Glance

Medicare is divided into four main parts. Each part covers a different category of health care. Here is a quick overview before we go deeper into each one:

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Medicare Advantage (Part C)

Medicare Advantage — also called Part C — is an alternative way to receive your Medicare benefits. Instead of getting your coverage directly from the federal government through Original Medicare, you enroll in a plan offered by a private insurance company that has been approved by Medicare.

These plans are required by law to cover everything that Original Medicare covers (Parts A and B), and most of them also include prescription drug coverage (Part D) built right in. Many Medicare Advantage plans also offer extra benefits that Original Medicare does not cover, such as dental care, vision exams and eyewear, hearing aids, and fitness memberships.

How Medicare Advantage Plans Work

When you enroll in a Medicare Advantage plan, you still technically have Medicare — you are just choosing to receive your benefits through a private plan. The federal government pays that insurance company a set amount each month to cover your care. In exchange, the insurance company manages your benefits, sets your copays and deductibles, and maintains a network of doctors and hospitals.

Many Medicare Advantage plans have $0 monthly premiums, which makes them appealing to people on a fixed income. However, it is important to understand that $0 premium does not mean $0 cost. You will still pay your Part B premium, and you will have copays each time you use your benefits.

Types of Medicare Advantage Plans

• HMO (Health Maintenance Organization): You must use doctors and hospitals within the plan’s network. You typically need a referral to see a specialist. These plans often have lower out-of-pocket costs but less flexibility in choosing providers.
• PPO (Preferred Provider Organization): You have more flexibility to see out-of-network providers, though it will cost more. You generally do not need referrals to see specialists.
• MSA (Medical Savings Account): A less common option that pairs a high-deductible plan with a tax-free savings account to help cover medical expenses.

The right type of plan depends on which doctors you want to keep, what medications you take, and how much flexibility you need in accessing care. This is exactly the kind of comparison a licensed Medicare advisor can walk you through — at no cost to you.

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Medicare Supplement Insurance (Medigap)

Medicare Supplement insurance — commonly called Medigap — is designed to fill in the gaps that Original Medicare leaves behind. As we discussed, Original Medicare covers most of your health care costs, but it does not cover everything. You are still responsible for deductibles, coinsurance, and copays. For many people, especially those who see specialists frequently or have chronic conditions, those out-of-pocket costs can become a significant burden.

A Medigap policy is sold by a private insurance company and works alongside your Original Medicare coverage. The plan pays for some or all of the costs that Medicare does not — like the 20% coinsurance under Part B, hospital deductibles, or extended stay costs under Part A.

Key Features of Medicare Supplement Plans

One of the biggest advantages of a Medigap plan is freedom to choose your providers. Unlike Medicare Advantage, Medigap plans do not have networks. You can see any doctor or specialist in the country who accepts Medicare — no referrals required. This is particularly important for people who travel frequently, spend part of the year in another state, or who want to maintain relationships with specific physicians.

Medicare Supplement plans are also standardized. That means Plan G from one insurance company offers the exact same benefits as Plan G from another company. The only difference is the price. This makes it easier to compare options — you are shopping for the best rate on identical coverage.

Because Medigap plans pay after Medicare pays, they are sometimes described as “second payer” coverage. Medicare pays its portion first, and then your Medigap plan covers the remaining approved costs — leaving you with little to no out-of-pocket balance in many situations.

What About Prescription Drugs?

Medicare Supplement plans do not include prescription drug coverage. If you choose Medigap, you will need to enroll in a separate Medicare Part D drug plan to cover your prescriptions. This is an important distinction compared to Medicare Advantage, which typically bundles drug coverage into the plan itself.

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Medicare Part D — Prescription Drug Coverage

Medicare Part D is the prescription drug benefit under Medicare. It was added to the program in 2006 to help beneficiaries afford the cost of their medications. Part D is available as a standalone plan for people with Original Medicare plus Medigap, or it may already be included inside a Medicare Advantage plan.

Part D plans are offered by private insurance companies approved by Medicare. Each plan has its own list of covered medications — called a formulary — and its own cost structure, including a monthly premium, an annual deductible, and copays or coinsurance for each prescription tier.

How Does Part D Work?

Part D coverage is divided into phases that determine how much you pay at any given point during the year:

• Annual Deductible: Before your plan begins paying, you may need to meet an annual deductible. In 2026, the maximum allowable Part D deductible is $590, though some plans have lower or no deductible depending on the medications they cover.
• Initial Coverage: Once your deductible is met, you pay a set copay or coinsurance for your drugs, and your plan pays the rest — until your total drug spending reaches a defined threshold.
• Coverage Gap (formerly “Donut Hole”): Beginning in 2024 and continuing in 2026, the coverage gap has effectively been closed thanks to the Inflation Reduction Act. You now pay no more than 25% of the cost of your covered drugs throughout the year.
• Catastrophic Coverage: After your out-of-pocket spending reaches $2,000 in 2026, Medicare covers 100% of your remaining drug costs for the rest of the calendar year — with no additional cost to you.

Choosing the Right Part D Plan

Not all Part D plans cover the same medications at the same cost. Before enrolling, it is critical to review whether your specific prescriptions are on the plan’s formulary and at what tier they are placed. The same medication can cost significantly different amounts depending on which plan you choose.

Failing to enroll in Part D when you are first eligible — and not having other creditable drug coverage — can result in a late enrollment penalty. This penalty is permanently added to your monthly Part D premium, so it pays to enroll on time even if you do not currently take many medications.

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When Can You Enroll in Medicare?

Enrollment timing is one of the most misunderstood parts of Medicare — and missing the right window can cost you money for the rest of your life through late enrollment penalties.

Initial Enrollment Period (IEP)

Your Initial Enrollment Period is a 7-month window that begins 3 months before the month you turn 65, includes your birthday month, and extends 3 months after. This is your first opportunity to sign up for Medicare Parts A and B without penalty.

Annual Enrollment Period (AEP)

Every year from October 15 through December 7, Medicare beneficiaries can switch, join, or drop Medicare Advantage plans and Part D drug plans. Changes made during AEP take effect January 1 of the following year. This is the most important enrollment window of the year for people who are already on Medicare and want to review their coverage.

Special Enrollment Periods (SEP)

If you missed your Initial Enrollment Period because you were still working and covered under an employer’s health plan, you may qualify for a Special Enrollment Period when that coverage ends. SEPs also exist for other qualifying life events, such as moving to a new area, losing coverage, or qualifying for low-income programs.

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