Medicare 101 · 01

What is Medicare?

Medicare is the U.S. federal health insurance program for people 65 and older, plus people under 65 with certain disabilities or end-stage renal disease (ESRD). It covers a portion of hospital, doctor, and prescription drug costs — but not all of them. The program has four parts (A, B, C, D), and you can be on either Original Medicare or a private Medicare Advantage plan.

The simplest definition

Medicare is health insurance—run by the federal government and funded mostly by payroll taxes you already paid during your working years. It's split into 4 "parts" because each part covers different things and has different rules.

Full breakdown of each part →

What Medicare is not

• Not free. Most people pay no premium for Part A (because they paid Medicare taxes for 10+ years), but Part B costs $202.90/month in 2026 and most people pay more for Part D and Medigap on top.
• Not Medicaid. Medicaid is a state/federal program for low-income folks. You can have both ("dual-eligible"), but they're separate.
• Not the same as Obamacare/ACA. ACA marketplace plans are for under-65. Medicare is a separate system.
• Not a long-term-care plan. Medicare covers short-term rehab and skilled nursing—not assisted-living or custodial care. That's a separate product (long-term-care insurance).
• Not optional in most cases. If you're collecting Social Security, you're auto-enrolled in Parts A and B at 65. Otherwise you sign up yourself.

Who pays for it?

Medicare is funded by a mix of payroll taxes (the 1.45% Medicare tax you've seen on every paycheck), beneficiary premiums, and general federal revenue. Part A is mostly paid for by your past payroll taxes. Part B is roughly 25% beneficiary premium and 75% federal revenue. Part C and Part D are paid for through a mix of premiums and government payments to private carriers.

How does it work day-to-day?

Once you're enrolled and have your red-white-and-blue Medicare card, you show it (or your Medicare Advantage card) at the doctor or hospital. The provider bills Medicare or your plan. You pay any deductible, copay, or coinsurance owed. Behind the scenes, a lot of paperwork moves between Medicare, your plan, and your provider—but for you, it usually just looks like presenting a card.

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