What Is Medicare? How It Works, Who Qualifies, and How To Enroll

What Is Medicare?

Medicare is a U.S. government health insurance program that primarily covers people age 65 or older, but can cover younger individuals with certain types of illnesses or medical conditions. Medicare covers particular healthcare services. Some services covered by Medicare require Medicare enrollees to share the costs. While this arrangement can offer participants more healthcare options and lower their costs, it can also create more complexity when they seek services.

Key Takeaways

Medicare is a national program that subsidizes healthcare services for anyone 65 or older, younger people with disabilities, and patients with end-stage renal disease or amyotrophic lateral sclerosis (ALS).
Medicare is divided into four components: Medicare Part A, Part B, Part C (also called Medicare Advantage), and Part D for prescription drugs.
Medicare Part A premiums are free for those who have made Medicare contributions through payroll taxes for at least 10 years.
Patients are responsible for paying premiums for other parts of the Medicare program.

How Medicare Works

Medicare is a national health insurance program funded by the U.S. Government and administered by the Centers for Medicare and Medicaid Services (CMS). Payroll taxes primarily fund Medicare, as dictated by the Federal Insurance Contributions Act (FICA).

The program extends coverage to people age 65 and older and to younger individuals with specific disabilities and those with permanent kidney failure or amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s disease.

If you're eligible to receive Social Security benefits when you turn 65, you will automatically be enrolled in Medicare Part A, which covers hospital costs, and Medicare Part B, which covers your visits to the doctor. Enrollment requires no action from you.

However, you must enroll for other parts of the Medicare program, such as Medicare Part D (drug coverage) or Medicare Supplement insurance (Medigap). If you miss your initial enrollment period or want to switch plans later, there are several annual Medicare open enrollment periods.

Note

Medicare Parts A and B are often referred to as “Original Medicare,” a term that signifies the coverages originally available when Medicare was established in 1965.

Qualifications for Medicare

Generally, United States citizens and permanent residents aged 65 and older can qualify for Medicare. According to the Social Security Administration, at age 65, you can qualify for Medicare Part A at no cost if:

You receive or meet eligibility requirements for Railroad Retirement Board (RRB) or Social Security benefits
Your living or deceased spouse receives or meets eligibility requirements for RRB or Social Security benefits
You or your spouse worked for the government and paid Medicare taxes for a sufficient period

You are a parent of a deceased child who was fully insured.

If you don't meet these requirements, you may be able to get Medicare Part A if you pay a monthly premium.

People under age 65 may qualify for Medicare Part A at no cost if they:

Have received Social Security Disability Insurance (SSDI) benefits for at least 24 months
Receive an RRB disability pension and meet certain Medicare conditions
Have ALS and receive SSDI benefits
Worked a sufficient period of time in a government job in which they paid Medicare taxes, and they have met the requirements for SSDI benefits for at least 24 months
Are age 50 or older and the child or surviving spouse (including a divorced spouse) or a child of a government worker who worked for a sufficient period in a Social Security eligible or Medicare-covered job. (You must also meet SSDI requirements.)
Suffer from end-stage renal disease, have received a kidney transplant, or undergo maintenance dialysis. (This qualifying factor applies if you have worked for a sufficient period in a railroad retirement system, Social Security, or Medicare-covered government position. You may also qualify if you are the child or spouse—including divorced spouse—of an individual who meets these work requirements.)

Anyone who qualifies for no-cost Medicare Part A can enroll for Medicare Part B benefits. Medicare Part B requires you to pay a monthly premium based on your income level. If you don't qualify for no-cost Part A coverage, you can purchase Part B independently if you are age 65 or older and are a:

United States citizen
Lawfully admitted noncitizen who has resided in the United States for five or more years

You can enroll in Medicare at the Social Security Administration (SSA) website.

Types of Medicare

Four types of Medicare programs are available to individuals. Basic Medicare typically includes Parts A and B or the Medicare Part C plan. Individuals also may opt to enroll in Medicare Part D for prescription drug coverage.

What Does Medicare Part A Cover?

Medicare Part A covers hospital, skilled nursing facility, hospice, and some home-based healthcare costs. However, this plan doesn’t cover long-term, assisted living, or custodial care facilities.

Coverage is automatic for anyone who receives Social Security benefits. If you do not receive SSA benefits, you can enroll through the SSA website.

Deductibles and copayments for Part A are as follows:

Part A Deductible and Copayment Amounts for Calendar Year 2026
	2026
Inpatient hospital deductible	$1,676
Daily copayment for 61^st–90^th Day	$419
Daily copayment for lifetime reserve days	$838
Skilled nursing facility copayment (21-100 days)	$209.50

Source: U.S. Centers for Medicare and Medicaid Services

What Does Medicare Part B Cover?

Medicare Part B covers costs for outpatient care, such as doctor visits. Part B also covers preventive services, ambulance transport, certain medical equipment, and mental health care.

The standard monthly premium for Medicare Part B enrollees is $185 for 2025 and $206.50 for 2026. The annual deductible is $257 in 2025 and $288 in 2026.

However, premiums are higher for taxpayers with modified adjusted gross income (MAGI) above limits adjusted annually. For 2025, these limits were set at $106,000 for single taxpayers and $212,000 for married couples filing jointly.

What Is Medicare Part C?

Individuals eligible for Medicare Parts A and B are also eligible for Part C, also known as Medicare Advantage. You purchase Medicare Advantage plans from private insurers or an agent rather than Medicare. These plans must offer coverage that is at least equivalent to Original Medicare (Parts A and B).

Many Medicare Advantage plans offer annual caps on out-of-pocket costs and provide benefits such as dental, vision, and hearing care.

Warning

Medicare Advantage comes with some disadvantages, including preauthorization requirements and less flexibility in choosing doctors. It may also be difficult to switch back to Original Medicare without undergoing medical underwriting.

What Is Medicare Part D?

Medicare offers supplemental prescription drug coverage through Medicare Part D. Enrollees in Medicare Part A or Part B may enroll in Part D to receive subsidies for prescription drug costs that Original Medicare plans do not cover.

Medicare Advantage plans often include drug coverage, but you may also need to purchase coverage separately. The average basic Part D premium for 2025 is $36.78 per month, a 6% increase over last year. But that's not the amount you'll pay. It reflects the cost of basic benefits only. KFF estimates that the average monthly premium for Medicare Part D will be $45 in 2025. However, many enrollees will pay less than the average amount.

Inflation Reduction Act and Medicare Part D

The Inflation Reduction Act of 2022 made some important changes to Medicare Part D, which were implemented in 2023 and 2024, including:

Covered insulin prescriptions available for $35 per month
No cost-sharing for recommended adult vaccines
An out-of-pocket prescription drug cost cap ($2,000 in 2025) in Medicare
Low-income subsidy program (LIS or “Extra Help”) expansion to 150% of the federal poverty level
Starting January 2025, caps Part D out-of-pocket costs at $2,000.This cap will be raised to $2,100 for 2026.

Medicare vs. Medicaid

Both Medicare and Medicaid are government-sponsored health insurance programs, but there are different eligibility requirements for each program. Some individuals qualify for both programs and are referred to as "dual eligibles."

While Medicare is meant for those ages 65 and older and younger people with certain health conditions, Medicaid is a joint federal and state program that provides healthcare coverage to low-income adults and children. To qualify for Medicaid, you must meet income requirements.

Anyone with Medicaid coverage is eligible to receive services such as doctor and nursing care, X-rays, hospitalization, home health care, and lab and X-ray services. Some states may offer expanded coverage for prescriptions, physical therapy, dental services, and medical transportation.

The History of the Medicare Program

In 1965, President Lyndon B. Johnson signed a bill that created the Medicare and Medicaid programs. The original Medicare program included Part A (Hospital Insurance) and Part B (Medical Insurance). Today, we refer to Parts A and B as Original Medicare.

In the intervening years, Congress expanded Medicare by making more people eligible for coverage and extending coverage for more medical conditions. In 1972, Medicare expanded to cover the disabled, people with end-stage renal disease who require dialysis or a kidney transplant, and people aged 65 or older who select Medicare coverage. Congress has since added new benefits like prescription drug coverage.

The Medicare Prescription Drug Improvement and Modernization Act (MMA) of 2003 made the biggest changes to Medicare in 38 years. MMA established the creation of private health plans approved by Medicare, known as Medicare Advantage Plans. These plans are sometimes called Part C or “MA Plans.” The MMA also expanded Medicare to include an optional prescription drug benefit, Part D, which went into effect in 2006.

On March 27, 2020, in response to the COVID-19 pandemic, then-President Donald Trump signed into law a $2 trillion package of relief measures, called the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It expanded Medicare coverage for the treatment of COVID-19. The CARES Act also improved telehealth service coverage and increased Medicare payments for COVID-19-related hospital stays and durable medical equipment.

In 2022, the Inflation Reduction Act was passed and included a redesign of Medicare prescription drug coverage and other costs.

Who Is Eligible for Medicare?

If you are 65 years old and eligible for Social Security, Medicare is an option for you. If you’ve received Social Security Disability Insurance (SSDI) for 24 months, you may qualify for Medicare, regardless of your age. Individuals who have certain disabilities, such as amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease) or permanent kidney failure, are automatically eligible.

Is Medicare Free?

For most individuals, Medicare Part A premiums are free based on past payroll tax payments under the Federal Insurance Contributions Act (FICA). Individuals can also qualify for free Medicare Part A based on the work history of a spouse. Those who do not qualify have to pay a premium for Medicare Part A. Other Medicare components require a premium payment.

Is Medicare Insurance?

Medicare covers healthcare costs for eligible individuals in the same way that health insurance does. Oftentimes, there is no premium for Medicare Part A, but coverage is more limited than private health insurance—no free preventive care or ongoing care for chronic diseases, for example. Private health insurance often allows you to extend coverage to dependents, such as a spouse and children. Medicare participants, on the other hand, must qualify based on their age or disability.

What Is Not Covered by Medicare?

Medicare doesn't cover the cost of some important health care services. Most crucially, it doesn't pay for long-term care, also known as custodial care. Medicaid, however, the joint state and federal health program for low-income people, may pay custodial costs.

Other common expenses that Medicare does not cover include:

Eye exams and eyeglasses
Dentures
Most dental care
Medical care overseas
Cosmetic surgery
Massage therapy

How Much Is Taken From Your Social Security Check for Medicare?

For individuals with qualifying work history, there’s no premium for Medicare Part A. The standard monthly premium for Medicare Part B is $174.70 for 2024 and $185 for 2025. The premium is automatically deducted from Social Security checks.

The Bottom Line

Medicare is a U.S. government health insurance program that subsidizes healthcare services. The plan covers people age 65 or older, younger people who meet specific eligibility criteria, and individuals with certain diseases.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

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CMS.gov. "Original Medicare (Part a and B) Eligibility and Enrollment."
National Archives. "Medicare and Medicaid Act (1965)."
Social Security Administration. "Medicare 2024." Page 3.
Social Security Administration. “Medicare Information.”
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U.S. Centers for Medicare and Medicaid Services. "Costs."
CMS.gov. "2025 Medicare Parts A & B Premiums and Deductibles."
U.S. Centers for Medicare and Medicaid Services. “What Part B Covers.”
Medicare.gov. "Understanding Medicare Advantage Plans."
U.S. Centers for Medicare and Medicaid Services. “What Medicare Part D Drug Plans Cover.”
CMS.gov. "CMS Releases 2025 Medicare Part D Bid Information and Announces Premium Stabilization Demonstration."
KFF. "Medicare Part D in 2025: A First Look at Prescription Drug Plan Availability, Premiums, and Cost Sharing."
CMS.gov. "Inflation Reduction Act and Medicare."
U.S. Department of Health and Human Services. "Inflation Reduction Act of 2022."
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Part of the Series

Guide to Medicare

What Is Medicare? How It Works, Who Qualifies, and How To Enroll

CURRENT ARTICLE

Medicare Basics

How Medicare Works

Medicare Part D (Prescriptions)

Medigap Insurance

Medicare Advantage (Part C)

Medicare vs. Medicaid

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What Is Medicare? How It Works, Who Qualifies, and How To Enroll

What Is Medicare?

Key Takeaways

How Medicare Works

Note

Qualifications for Medicare

Types of Medicare

What Does Medicare Part A Cover?

What Does Medicare Part B Cover?

What Is Medicare Part C?

Warning

What Is Medicare Part D?

Inflation Reduction Act and Medicare Part D

Medicare vs. Medicaid

The History of the Medicare Program

Who Is Eligible for Medicare?

Is Medicare Free?

Is Medicare Insurance?

What Is Not Covered by Medicare?

How Much Is Taken From Your Social Security Check for Medicare?

The Bottom Line

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