How Does Medicare Work? A Beginner's Guide to Parts A, B, C and D

If you are turning 65 soon, helping a parent, or simply tired of nodding along when someone says "Part B," you are in the right place. Medicare is one of the most valuable benefits you will ever have, and also one of the most confusing to read about. The good news is that once you understand the four parts and how they fit together, the rest of the decisions get much easier.

This beginner's guide answers the question we hear every day at The Sosa Insurance Group: how does Medicare work? We will cover who is eligible, what Parts A, B, C and D each do, what they cost in 2026, when you can enroll, and how New Jersey seniors typically put the pieces together. It is written in plain English, with no jargon you cannot look up on the same page.

What Medicare is and who is eligible

Medicare is the federal health insurance program for people age 65 and older, and for certain younger people with disabilities or specific conditions such as End-Stage Renal Disease or ALS. It is run by the Centers for Medicare & Medicaid Services (CMS), and it is separate from Medicaid, which is income-based.

You are generally eligible for Medicare if:

• You are 65 or older and a U.S. citizen or a permanent legal resident who has lived in the country for at least five continuous years, or
• You are under 65 and have received Social Security Disability benefits for 24 months, or
• You have ESRD or ALS, which qualify you without the waiting period.

Most people qualify for premium-free Part A because they or a spouse paid Medicare taxes for at least 10 years (40 quarters). If you are unsure about your Medicare eligibility, our team can check your situation in a few minutes; just schedule a consultation or read our first-time enrollee guide for New Jersey.

The four parts of Medicare at a glance

Medicare is built in parts, and each letter covers a different kind of care. Here is the map you will want to keep in your head.

• Part A — Hospital insurance. Inpatient hospital stays, skilled nursing facility care after a hospital stay, hospice, and some home health care.
• Part B — Medical insurance. Doctor visits, outpatient care, preventive services, lab tests, durable medical equipment, and many outpatient drugs.
• Part C — Medicare Advantage. Private plans that bundle Parts A and B (and usually D) into one plan, often with extras like dental, vision and hearing.
• Part D — Prescription drug coverage. Private plans that cover the medications you pick up at the pharmacy.

Parts A and B together are called Original Medicare. Parts C and D are offered by private insurance companies that contract with Medicare, which is why their costs and networks vary by plan and by county.

Part A: hospital insurance

Part A is the foundation. If you are admitted to the hospital as an inpatient, Part A helps pay for your semi-private room, meals, nursing care, and hospital services. It also covers up to 100 days in a skilled nursing facility after a qualifying three-day hospital stay, hospice care, and part-time home health care ordered by your doctor.

For 2026, most people pay no monthly premium for Part A. You do pay a deductible of $1,736 per benefit period when you are admitted, plus daily coinsurance for stays longer than 60 days. A benefit period starts when you are admitted and ends when you have been out of the hospital or skilled nursing facility for 60 days in a row, so it is possible to pay the deductible more than once in a year.

Part B: medical insurance

Part B covers the care you receive outside a hospital bed: doctor and specialist visits, outpatient surgery, emergency room visits, ambulance services, preventive screenings, flu and other vaccines, mental health services, physical therapy, and durable equipment like walkers and oxygen. It also covers certain drugs administered in a doctor's office, such as chemotherapy and many injections.

Part B has a monthly premium, which for 2026 is a standard $202.90 per month for most people. Higher-income households pay more through an income-related adjustment (IRMAA). The 2026 annual deductible is $283, and after that Original Medicare generally pays 80% of the Medicare-approved amount for covered services and you pay 20%. That 20% has no annual cap under Original Medicare alone, which is why most people add either a Medicare Supplement or a Medicare Advantage plan.

Explore how our Medicare plans can help cover that gap, or talk with an agent in West Orange, Newark or Jersey City.

Part C: Medicare Advantage

Medicare Advantage plans (Part C) are offered by private insurers approved by Medicare. When you join one, you still have Medicare, but the plan delivers your Part A and Part B benefits and usually includes Part D prescription coverage in the same plan. Many plans also add benefits Original Medicare does not cover, such as routine dental, vision, hearing aids, fitness memberships, and over-the-counter allowances.

Trade-offs to understand:

1. Networks. Most Advantage plans are HMOs or PPOs with a network of doctors and hospitals. Staying in network keeps costs down.
2. Cost sharing. Instead of Original Medicare's 20%, you pay copays or coinsurance set by the plan, and every plan has an annual out-of-pocket maximum for medical costs.
3. Premiums. Some plans have a $0 monthly premium beyond your Part B premium; others charge more for richer benefits.
4. Local availability. Plans vary by county, so what is available in Essex County may differ from Hudson or Morris County.

Our comparison of Medigap vs. Medicare Advantage walks through which type of coverage tends to fit which kind of person.

Part D: prescription drug coverage

Part D helps pay for the outpatient prescription drugs you fill at a pharmacy. You can get it as a stand-alone plan alongside Original Medicare (often paired with a Medicare Supplement), or built into a Medicare Advantage plan.

Each Part D plan has its own formulary (list of covered drugs), pharmacy network, monthly premium and cost-sharing structure. Two things every beginner should know:

• The 2026 out-of-pocket cap. Under current federal rules, your out-of-pocket spending on covered Part D drugs is capped at $2,100 for 2026. Once you reach it, you pay nothing more for covered drugs for the rest of the year. There is also an option to spread your drug costs into monthly payments.
• The late enrollment penalty. If you go 63 days or more without Part D or other creditable drug coverage after you are first eligible, you may pay a permanent monthly penalty when you do enroll. Even if you take no medications today, it is usually worth having a low-cost plan.

Read our Part D prescription drug coverage guide for a deeper walk-through of formularies and coverage phases.

What Medicare costs in 2026

Numbers make the parts feel concrete. The chart below shows the standard 2026 cost benchmarks that apply to most beneficiaries; your own costs will depend on your income, the plans you choose, and how much care you use.

Two takeaways from the chart. First, Part A costs nothing monthly for most people, but a hospital stay triggers a meaningful deductible. Second, Part B's premium is the one predictable monthly cost almost everyone pays, and it is usually deducted right from your Social Security check. Everything else — Advantage, Supplement and Part D premiums — is a choice you make based on how you want to manage the 20% and the drug costs. Our guide to understanding Medicare costs in New Jersey goes deeper on planning for these expenses.

When you can enroll

Medicare runs on windows, and missing one can mean higher costs later. The key periods are:

• Initial Enrollment Period (IEP). Seven months around your 65th birthday: the three months before, your birthday month, and the three months after. If you are already receiving Social Security, you are enrolled in Parts A and B automatically.
• General Enrollment Period. January 1 to March 31 each year, for people who missed their IEP. Coverage begins the month after you sign up, and late penalties can apply.
• Annual Enrollment Period (AEP). October 15 to December 7 each year. You can join, switch or drop Medicare Advantage and Part D plans for coverage starting January 1.
• Medicare Advantage Open Enrollment. January 1 to March 31, for people already in an Advantage plan who want to switch plans or return to Original Medicare.
• Special Enrollment Periods. Triggered by events like leaving employer coverage, moving, or losing other coverage.

If you are still working at 65 with employer coverage, you may be able to delay Part B without penalty, but the rules depend on the size of your employer. This is one of the most common places people make expensive mistakes, so it is worth a quick conversation before you decide. Our 2026 New Jersey enrollment guide covers each window in more detail.

Putting it together: two common paths

Most New Jersey seniors end up on one of two paths.

Path 1: Original Medicare + Medicare Supplement + Part D. You keep Parts A and B, add a Medigap plan to cover most of the 20% and deductibles, and buy a stand-alone Part D plan. This path offers the widest choice of doctors nationwide and predictable costs, in exchange for higher monthly premiums.

Path 2: Medicare Advantage (with drug coverage). You enroll in a single private plan that bundles everything, often for a low or $0 additional premium, with extras like dental and vision, in exchange for using a network and paying copays as you go.

Neither is "better." The right answer depends on your doctors, your prescriptions, your budget, and how much you travel. That is exactly what a licensed agent helps you sort out, at no cost to you. Learn about our team and how we work, or, if you are an agent yourself, explore careers with Sosa.

Frequently misunderstood points

• Medicare is not free. Part A usually is, but Part B, Part D and any private plan carry premiums and cost sharing.
• Medicare does not cover long-term custodial care, most dental, vision or hearing (unless through an Advantage plan), or care outside the U.S. in most cases.
• You do not have to be retired to enroll in Medicare at 65.
• Medicare and Medicaid are different. Some New Jersey residents qualify for both, and there are programs that help with premiums and drug costs.

Get help understanding your options

Understanding how Medicare works is the first step; choosing the right combination for your life is the second. The Sosa Insurance Group helps New Jersey seniors compare plans from multiple carriers, in English, Spanish, Haitian Creole and Portuguese, with no cost or obligation. Get started here, schedule a consultation, or call or text us at 800-552-1934. We will walk through your Parts A, B, C and D one at a time, at your pace.