Medicare Explained at 65: Parts A, B, C, D, Costs & Enrollment Timing
If you're nearing age 65 and trying to understand Medicare — the "alphabet soup" of Parts A, B, C, and D — this guide will help you get up to speed.
Today we’ll cover:
The different parts of Medicare (A, B, C, and D)
The costs associated with each
Late enrollment penalties
When to enroll (and when you can delay)
Medicare Advantage vs. Medigap
Common mistakes to avoid
For context, we’ll assume you plan to fully retire and leave your employer-sponsored health plan when you become eligible for Medicare at age 65.
Do You Have to Enroll at 65?
If you are retiring at 65 and losing employer coverage, you generally should enroll during your Initial Enrollment Period to avoid penalties and gaps in coverage.
However, if you are still working (or covered under your spouse’s employer plan) and that employer has 20 or more employees, you may delay enrolling in Medicare Parts A and B without penalties. You would then use a Special Enrollment Period (SEP), which lasts for 8 months after your employer coverage ends.
If your employer has fewer than 20 employees and you do not enroll in Medicare at 65, Medicare may become primary — and your employer coverage may not pay properly.
Timing matters.
Medicare Late Enrollment Penalties
Enrolling late can result in permanent penalties.
Part B Penalty
If you fail to enroll in Part B when eligible (and don’t qualify for a Special Enrollment Period):
You pay a 10% penalty for every full 12-month period you were eligible but did not enroll.
The penalty lasts for life.
Example:
If you enroll 2 years late, that’s a 20% penalty.
With the 2026 standard Part B premium at $202.90/month, a 20% penalty increases your premium to approximately $244/month — and the penalty increases as premiums rise.
Part D Penalty
If you do not enroll in Part D (and do not have creditable prescription coverage):
You pay 1% of the national base premium for every month you were uncovered.
The penalty lasts for life.
Example:
14 months late = 14% penalty.
With the 2026 base premium around $38.99, that equals about $5/month extra — every month for life.
While smaller than Part B penalties, it’s still unnecessary money out the door.
When Should You Enroll?
Your Initial Enrollment Period (IEP) lasts 7 months:
3 months before your 65th birthday
The month of your birthday
3 months after
If You Enroll Before Your Birthday Month
Coverage begins the first day of your 65th birthday month.
If You Enroll During or After Your Birthday Month
Coverage begins the first day of the following month.
If your employer coverage ends at the end of your birthday month, you can time enrollment so Medicare starts the next month — avoiding any lapse.
Breaking Down the Parts of Medicare
Part A – Hospital Insurance
For about 99% of Americans, Part A is premium-free.
It covers:
Inpatient hospital stays
Skilled nursing facility care
Hospice care
Some home health services
2026 Cost Structure
Deductible: $1,736 per benefit period
Days 1–60: $0 after deductible
Days 61–90: $434/day
Days 91+: $868/day (lifetime reserve days, up to 60)
After lifetime reserve days are exhausted, you pay all costs.
Part B – Medical Insurance
Part B covers:
Doctor visits
Outpatient services
Preventive care
Durable medical equipment
Mental health services
Certain medications
Part B generally pays 80% of approved costs. You are responsible for the remaining 20% — which is why many people purchase supplemental coverage.
The 2026 base premium: $202.90/month (higher for high-income individuals).
Part D – Prescription Drug Coverage
Part D helps cover prescription medications.
You must enroll if:
You don’t have creditable drug coverage, and
You want to avoid lifetime penalties.
Part D plans vary in cost and formularies. You should compare plans annually.
Supplemental Coverage: Medicare Advantage vs. Medigap
Once enrolled in Parts A and B, you have two primary options for additional coverage.
Option 1: Medicare Advantage (Part C)
Medicare Advantage plans are offered by private insurance companies and bundle:
Part A
Part B
Often Part D
Additional benefits (dental, vision, hearing, gym memberships)
Roughly half of Medicare enrollees choose Advantage plans.
Pros
Lower premiums (some $0 plans)
Extra benefits
Simplicity (bundled coverage)
Cons
Provider networks
Prior authorization requirements
Plan changes annually
Potentially higher out-of-pocket costs if seriously ill
You can change Advantage plans annually during:
October 15 – December 7 (Annual Enrollment Period)
Option 2: Medigap (Medicare Supplement)
Medigap policies supplement Original Medicare.
You keep Parts A and B
You purchase a standardized supplemental policy
You buy a separate Part D plan
Medigap plans are labeled A–D, F, G, K, and N.
For new enrollees, Plan G is the most comprehensive widely available option.
Example Cost (Connecticut – New Haven County)
Plan G: Approximately $246/month
Part B: $202.90/month
Part D: Additional premium
Total monthly cost can exceed $450–$500 before adding dental or vision coverage.
However, Medigap often provides broader provider access and more predictable out-of-pocket costs.
Important Enrollment Considerations
Your Medigap Open Enrollment Period lasts 6 months after enrolling in Part B.
In most states, if you choose Medicare Advantage first, you may later be medically underwritten if you try to switch to Medigap.
A few states (including Connecticut and Massachusetts) offer more flexibility.
Your health status and state of residence matter significantly.
Key Takeaways
Enroll on time to avoid lifetime penalties.
Understand how employer size affects enrollment timing.
Compare Medicare Advantage and Medigap carefully.
Review plans annually — especially Advantage and Part D.
Coordinate Medicare with your broader retirement plan.
Medicare is not just a health decision — it’s a financial planning decision.
Retirement Planning Course Offer
If you don’t yet have a comprehensive retirement plan, consider enrolling in my online course:
Retirement Readiness Review On Demand
Regular price: $297
Current discounted price: $99 (Use code: retire99)
You must enroll by the end of February to lock in this discount.
The course covers:
Medicare
Social Security
Taxes
Retirement income strategies
Investments
Estate planning
Enroll at: retirewithryan.com → Courses → Retirement Readiness On Demand
As always, have a great week and I look forward to talking with you next Friday. Take care.
Written by Ryan Morrissey CFP®, CLU®, CHFC®, CMFC
Founder & Principal Advisor of Morrissey Wealth Management
Host of the Retire with Ryan Podcast