Medicare is the federal health insurance program primarily for people age 65 or older. It also covers younger individuals with certain disabilities or end-stage renal disease. For the 2026 tax year, significant updates have been implemented to lower out-of-pocket prescription costs and adjust premiums to match inflation.

The Four Parts of Medicare

Medicare is divided into four “parts,” each covering specific services:

Part A: Hospital Insurance

Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care.

  • Cost: Most people do not pay a premium for Part A because they paid Medicare taxes while working.
  • 2026 Deductible: The deductible for each benefit period is $1,736.
  • Daily Coinsurance: After 60 days of hospitalization, you pay $434 per day (days 61–90) and $868 per day for “lifetime reserve days.”

Part B: Medical Insurance

Part B covers certain doctors’ services, outpatient care, medical supplies, and preventive services.

  • Standard Premium: In 2026, the standard monthly premium is $202.90. High earners may pay more due to income-related adjustments (IRMAA).
  • 2026 Deductible: The annual deductible is $283.
  • Coinsurance: Generally, you pay 20% of the Medicare-approved amount for most services after you meet your deductible.

Part C: Medicare Advantage

Medicare Advantage plans are an “all-in-one” alternative to Original Medicare (Parts A and B). These plans are offered by private companies approved by Medicare.

  • Coverage: They must cover everything Original Medicare covers but often include extra benefits like vision, dental, and hearing.
  • Integrated Drug Coverage: Most 2026 Advantage plans (MA-PDs) include Part D prescription drug coverage.
  • Out-of-Pocket Limit: In 2026, the maximum out-of-pocket limit for in-network services is $9,250, providing a financial safety net that Original Medicare does not offer.

Part D: Prescription Drug Coverage

Part D helps cover the cost of self-administered prescription drugs.

  • The 2026 Cap: A major change for 2026 is a $2,100 annual cap on out-of-pocket costs for Part D covered drugs. Once you spend $2,100, you pay $0 for covered medications for the rest of the year.
  • Premium Changes: While plans vary, the average standalone Part D premium is projected to decrease to approximately $34.50 in 2026.

Eligibility and Enrollment in 2026

Most people become eligible for Medicare when they turn 65.

  • Initial Enrollment Period: This is a seven-month window that includes the three months before you turn 65, your birthday month, and the three months after.
  • Automatic Enrollment: If you are already receiving Social Security benefits at age 65, you are typically enrolled in Parts A and B automatically.
  • Special Enrollment Period (SEP): If you are still working and have “creditable” coverage through an employer, you can often delay Part B without penalty until you retire.

Source: Medicare.gov, “Medicare & You 2026 Handbook”; and KFF, “Medicare Advantage 2026 Spotlight.”