You'll most likely rely on Medicare to cover your retirement healthcare expenses after you turn 65. In some respects, it's just like the health insurance you might have received through your employer or a marketplace. However, some differences could trip you up if you're not expecting them.

Understanding these three things now could save you some time and confusion when you're ready to sign up for Medicare. This is especially important if you plan to apply in 2026.

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1. Original Medicare and Medicare Advantage plans are two different things

Original Medicare consists of Part A (hospital insurance) and Part B (medical insurance). The former covers expenses such as hospital stays and home healthcare visits, while the latter covers doctor visits and outpatient procedures.

This forms the basis of most people's retirement healthcare coverage but leaves a lot of gaps. Original Medicare doesn't cover expenses for dental, vision, and hearing care. It also doesn't cover prescription drugs.

Paying for these items out-of-pocket gets expensive quickly. That's why many seniors on Original Medicare add a Part D plan for prescription drug coverage and a Medicare supplement, or Medigap, plan to cover services that Original Medicare doesn't. Both Part D and Medigap plans are available through private insurers.

Medicare Advantage plans, also known as Part C, are alternatives to Original Medicare for individuals seeking comprehensive coverage without the need to manage multiple policies. These plans are also available through private insurers and generally cover everything in Original Medicare, plus some extras.

Medicare Advantage could be a better choice if you anticipate a lot of medical expenses in a given year because it has an annual out-of-pocket maximum, while Original Medicare doesn't. But Medicare Advantage plans typically require you to stick to the insurer's care provider network, which may be restrictive.

You must choose one or the other, though. You can't have a Medicare Advantage plan and a Part D or Medigap policy.

2. Medicare isn't free

Medicare has premiums, deductibles, and coinsurance, much like the health insurance you may have gotten through your employer. Premiums are the monthly amount you pay to keep the policy in force.

Few people pay a Part A premium, and the Part B premium will increase to $202.90 in 2026. If you're on Social Security, the Social Security Administration typically withholds your Part B premiums from your checks so you don't have to worry about a bill.

Deductibles are the amount you must pay before your insurer will help cover your care. The Part A deductible will climb to $1,736 in 2026, while the Part B deductible will jump to $283 for most people. Some high earners will pay more.

You'll also have a 20% coinsurance on most services. This is the percentage you must pay toward the cost of your care after you have met your deductible.

If you have a Medicare Advantage plan or Part D and Medigap plans, you'll also face premiums, deductibles, and copays, and your insurer will set the amounts. You'll be able to see these costs for all the available plans when you're ready to sign up.

3. There are penalties for late enrollment

Your initial enrollment period for Medicare begins three months before you turn 65 and ends three months after you turn 65. It's important to sign up during this window, even if you still have other health insurance, because failing to do so could result in penalties.

Late-enrollment penalties are not a one-time cost. They will increase your Medicare expenses for the rest of your life. Your Medicare Part B premiums will increase by 10% every year you were eligible to sign up but didn't. So waiting even one year could raise your Part B premium from $283 in 2026 to $311 per month -- $28 more. That difference could grow even more over time as Medicare costs increase due to inflation.

Most people don't have to worry about a Part A penalty because they don't need to buy Part A coverage. However, those who do and fail to sign up for it will see their premiums rise by 10%. It will remain high for twice as many years as the number of years you didn't sign up. For example, if you waited one year to apply for Part A coverage, you'll pay the penalty for two years.

There's also a late enrollment penalty for Part D coverage. You don't have to worry about this if you opt for a Medicare Advantage plan, as these plans typically include prescription drug coverage. Some low-income seniors who qualify for Extra Help also don't face Part D penalties even if they sign up late.

Everyone else faces a penalty of 1% per month (12% per year) for not joining a Medicare Part D plan when they first enroll in Medicare. You may also pay higher premiums.

If you have any questions about how Medicare works, contact the Center for Medicare and Medicaid Services. If you have a policy through a private insurer, reach out to that company. Make sure you understand what's covered and what isn't before you apply.