What are the parts of Medicare, and when do you have to enroll?

Medicare has four parts serving different functions. Part A covers inpatient hospital care, skilled nursing facility stays, and hospice, and is premium-free for most people based on work history. Part B covers physician services, outpatient care, preventive services, and durable medical equipment, and carries a monthly premium that increases at higher incomes. Part D covers prescription drugs through private plans. Part C, called Medicare Advantage, is an alternative in which a private insurer delivers Parts A and B and usually D together, often with additional benefits, in exchange for network restrictions and prior authorization requirements that original Medicare does not impose.

Enrollment timing carries lasting financial consequences. The initial enrollment period spans seven months around your 65th birthday. Missing it without qualifying coverage generally triggers late enrollment penalties: for Part B, a permanent premium increase for each full year you delayed, and for Part D, a permanent surcharge calculated from the months without creditable drug coverage. These penalties last as long as you have the coverage, not for a limited period, which is why the enrollment date deserves a calendar entry years in advance.

The main exception is being covered by an active employer group health plan through your own or a spouse's current employment, which generally permits delaying Part B without penalty and provides a special enrollment period afterward. Retiree coverage and COBRA do not count for this purpose, a distinction that generates expensive mistakes. Two further points. Original Medicare has no out-of-pocket maximum, which is why supplemental Medigap policies exist, and Medigap has its own enrollment window with guaranteed issue rights that, once missed, can allow insurers to deny coverage or price on health status in most states. And switching from Medicare Advantage back to original Medicare later may leave you unable to obtain Medigap on favorable terms, which makes the initial choice more consequential than it appears.