Part 1 — Direct Answer

Medicare is the federal health insurance program for Americans 65 and older. It consists of four main parts: Part A covers inpatient hospital care and is premium-free for most people. Part B covers outpatient medical services and has a standard monthly premium (approximately $185 in 2026, higher if your income exceeds IRMAA thresholds). Part C (Medicare Advantage) is a private insurance alternative to original Medicare. Part D covers prescription drugs. Most retirees pay no premium for Part A, a monthly premium for Part B and D, and additional costs for copays, deductibles, and the gap coverage that original Medicare doesn't provide.

Part 2 — Detailed Explanation

Medicare enrollment begins at age 65 regardless of whether you are still working. The Initial Enrollment Period runs from three months before your 65th birthday to three months after — a seven-month window. Missing this window without qualifying for a Special Enrollment Period can result in permanent late enrollment penalties on Part B (10% per year for each 12-month period you were eligible but didn't enroll) and Part D (1% per month of delayed enrollment, also permanent). These penalties compound for life and are one of the most common and expensive Medicare mistakes.

Part A covers inpatient hospital stays, skilled nursing facility care following a qualifying hospital stay, some home health care, and hospice. For most people who have worked and paid Medicare taxes for at least 10 years (40 quarters), Part A is premium-free. For those without sufficient work history, Part A premiums in 2026 are up to $505 per month.

Part B covers physician services, outpatient hospital care, preventive services, durable medical equipment, and other outpatient services. The standard Part B premium is approximately $185 per month in 2026, but this amount increases for higher-income beneficiaries through IRMAA surcharges. Part B also has an annual deductible and a 20% coinsurance on covered services — with no out-of-pocket maximum under original Medicare.

Part C, or Medicare Advantage, is offered by private insurance companies approved by Medicare. These plans provide Part A and B benefits and usually include Part D drug coverage in one bundled plan. Medicare Advantage plans often have lower premiums than original Medicare plus a supplement, but they use provider networks and require prior authorization for some services. For Arizona retirees, Medicare Advantage plan availability is generally strong in the Phoenix and Tucson metropolitan areas but may be more limited in rural parts of the state.

Part D covers prescription drugs through private insurance plans. Premiums, deductibles, and formularies vary by plan. Starting in 2025, a $2,000 out-of-pocket maximum on prescription drug costs was implemented under the Inflation Reduction Act — a significant change that capped previously unlimited drug cost exposure.

Medigap (Medicare Supplement) policies are available with original Medicare (Parts A and B) to cover the gaps — particularly the 20% coinsurance under Part B. Medigap plans are sold by private insurers and standardized by the government. The most comprehensive plans have higher premiums but provide near-complete coverage of out-of-pocket costs under original Medicare.

Part 3 — What This Means for You

The most important Medicare planning decision you'll make isn't which plan to choose — it's managing the income that determines your IRMAA surcharges. Your Part B and Part D premium is determined by your income from two years prior. Large Roth conversions, IRA distributions, or asset sales in the years before Medicare enrollment can trigger elevated premiums that last for two years. Planning your income in the two years before you turn 65 is as important as choosing the right plan.

The second most important decision is enrolling on time. If you retire before 65, you need a bridge health insurance strategy — either COBRA, marketplace coverage, or a spouse's employer plan. Understanding when to transition from bridge coverage to Medicare and how to avoid late enrollment penalties requires careful timing.

Part 4 — Common Mistakes and Misconceptions

• The most common mistake is missing the Initial Enrollment Period. Believing that Medicare enrollment can be delayed indefinitely because you have other coverage — when that other coverage doesn't qualify as creditable — results in permanent premium penalties.
• The second mistake is not accounting for Medicare costs in retirement income projections. Healthcare in retirement costs more than most pre-retirees estimate. Premium costs, IRMAA surcharges, copays, and dental/vision costs not covered by Medicare routinely exceed $10,000-$15,000 per year per person.
• The third mistake is choosing a plan based on current health rather than future risk. Medicare Advantage plans with restrictive networks can become problematic if you develop a serious illness requiring specialists outside the network.