13.1 Medicare Parts A, B, C, and D

Medicare is the federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS). It covers three groups: people age 65 and older, people under 65 who have received Social Security Disability Insurance (SSDI) for 24 months, and people of any age with End-Stage Renal Disease (ESRD) or amyotrophic lateral sclerosis (ALS).

The Four Parts of Medicare

Original Medicare consists of Part A and Part B. Parts C and D are delivered through private insurers contracting with CMS.

Part A Cost-Sharing (Benefit Period Mechanics)

Part A uses a benefit period, which begins on hospital admission and ends after 60 consecutive days with no inpatient or SNF care. A new benefit period means a new deductible. There is no annual cap on benefit periods.

• Days 1-60: pay the inpatient deductible, then $0 coinsurance.
• Days 61-90: a daily coinsurance applies.
• Days 91+: lifetime reserve days (60 total, non-renewable) with higher daily coinsurance.
• SNF: days 1-20 fully covered after a qualifying 3-day inpatient stay; days 21-100 carry coinsurance; no coverage after day 100.

Trap: Part A does NOT cover custodial/long-term care. SNF coverage is skilled and time-limited, not nursing-home residency.

Part B Mechanics and Enrollment

Part B requires a monthly premium and applies a small annual deductible; after the deductible, Medicare pays 80% of the approved amount and the beneficiary pays 20% coinsurance with no out-of-pocket maximum. High earners pay an income-related monthly adjustment amount (IRMAA).

Enrollment Periods

Worked penalty example: Part B late penalty is 10% of the premium for each full 12-month period the person could have enrolled but did not. If someone delays Part B for 36 months (3 full years) without creditable coverage, the penalty is 3 x 10% = 30% added to the premium for life. Part D adds 1% of the national base beneficiary premium per month without creditable drug coverage.

Part C: Medicare Advantage

Medicare Advantage (Part C) plans are sold by private insurers approved by CMS. The beneficiary must first enroll in Parts A and B, then may elect a Part C plan that delivers those benefits through a managed-care network (HMO or PPO), usually with a different cost-sharing structure and an annual out-of-pocket maximum that Original Medicare lacks. Most Advantage plans bundle Part D drug coverage and may add extras like routine dental, vision, or hearing.

Key enrollment windows for Part C and D:

• Annual Election Period (AEP): October 15 - December 7, to join, switch, or drop plans.
• Medicare Advantage Open Enrollment: January 1 - March 31, to switch Advantage plans or return to Original Medicare.

Trap: Choosing Part C does not eliminate the Part B premium; the beneficiary continues paying Part B and may pay an additional plan premium.

Part D: Prescription Drug Coverage

Part D is voluntary outpatient prescription drug coverage delivered through private plans, either as a stand-alone drug plan added to Original Medicare or bundled inside a Medicare Advantage plan. Each plan publishes a formulary (its covered-drug list) organized in cost-sharing tiers. The standard benefit includes an annual deductible, a coinsurance phase, and a catastrophic-coverage threshold after which the beneficiary's cost-sharing drops sharply.

To avoid the Part D late-enrollment penalty, a person who delays must show continuous creditable drug coverage (coverage at least as good as the standard Part D benefit, such as an employer plan). The penalty accrues at 1% of the national base beneficiary premium per uncovered month and is added permanently once the person finally enrolls.

The Four Parts and 2026 Cost Anchors

Medicare covers those 65+ (or under 65 on SSDI for 24 months, or with ESRD/ALS):

Part A uses a benefit period that begins on admission and ends after 60 consecutive days out of a facility; a deductible applies each benefit period, with coinsurance starting at day 61 and lifetime reserve days (60, one-time) for stays beyond 90. Part B requires meeting an annual deductible, then Medicare pays 80% and the beneficiary owes 20% with no out-of-pocket cap — the gap that Medigap fills. The Initial Enrollment Period spans the 7 months around the 65th birthday month; missing it without creditable coverage triggers a lifetime Part B premium penalty of 10% per 12 months late.

The Part D Initial Coverage and catastrophic phases were restructured by the Inflation Reduction Act, which added a hard annual out-of-pocket cap on Part D drug spending.