5.1 Medicare Parts A, B, C, and D

The AAPC Certified Outpatient Coder exam places Medicare Parts A, B, C, and D inside the Payment methodologies domain. That domain is 13 of 100 questions. This section is independent study material from OpenExamPrep for people preparing for that domain. It is not an AAPC publication, and it does not claim review, partnership, or approval by AAPC or by the Centers for Medicare & Medicaid Services (CMS).

A hospital outpatient coder who mixes up the parts will pick the wrong payer, the wrong claim format, and the wrong payment system. The next chapter in this guide covers the Outpatient Prospective Payment System (OPPS) and Ambulatory Payment Classifications (APCs). This section only previews that world: hospital outpatient facility services under Original Medicare are Part B services that generally process under OPPS. Status indicators, packaging, and comprehensive APCs belong in that later chapter, not here.

Original Medicare versus Medicare Advantage

When a person first enrolls in Medicare, CMS describes two main ways to get coverage. Original Medicare is fee-for-service Part A plus Part B. The beneficiary may join a separate Medicare drug plan for Part D and may buy Medigap (Medicare Supplement Insurance) to help with deductibles and coinsurance. Claims for Original Medicare go to a Medicare Administrative Contractor (MAC).

Medicare Advantage, also called Part C, is a Medicare-approved private health plan. These plans bundle Part A and Part B and usually include Part D. They often use networks and prior authorization, and they have a yearly out-of-pocket maximum that Original Medicare does not. Extra benefits such as vision, hearing, or dental may be offered. For a patient enrolled in an MA plan, the hospital and the physician submit claims to that plan, not to the Original Medicare A/B MAC. CMS's Medicare billing booklets (MLN006926 for the institutional claim and MLN006976 for the professional claim, December 2025) state that Medicare Advantage claims go to the patient's MA plan.

Coding does not switch to a private language just because the plan is Part C. The Health Insurance Portability and Accountability Act (HIPAA) still requires standard medical code sets on health care transactions. Outpatient diagnosis coding uses ICD-10-CM. Outpatient procedures, services, and supplies use HCPCS, which includes CPT (HCPCS Level I) and HCPCS Level II. ICD-10-PCS is the inpatient facility procedure code set on Medicare Part A inpatient claims, not the outpatient hospital code set. An MA plan may apply different payment edits, modifiers, or medical-policy rules than Original Medicare. CMS has stated that MA plans are not prohibited from using payment modifiers. The coder still reports the same HIPAA code sets that describe what was documented.

Part A: Hospital Insurance

Part A is Hospital Insurance. CMS and Medicare.gov describe it as covering inpatient care in hospitals, skilled nursing facility (SNF) care, hospice care, and some home health care. About 99 percent of beneficiaries pay no Part A premium because they (or a spouse) have at least 40 quarters of Medicare-covered employment.

For calendar year 2026, CMS announced these Part A cost-sharing amounts:

The inpatient deductible is the beneficiary's share for the first 60 days of Medicare-covered inpatient hospital care in a benefit period. Physician services during that inpatient stay are still Part B services. The hospital's room, nursing, inpatient pharmacy, and other hospital-furnished inpatient services are the Part A facility side. That split is why an inpatient hospital claim and a surgeon's professional claim are not the same document, even when both happen on the same calendar day.

Part A SNF coverage is not a second copy of hospital outpatient surgery. It is extended care after a qualifying inpatient hospital stay, subject to Medicare's SNF rules. Hospice is also a Part A benefit. Home health can appear under Part A or Part B depending on the beneficiary's circumstances; CMS lists some home health under Part A and certain home health services under Part B. The COC candidate should not treat every service that happens inside a hospital building as Part A. Setting and admission status control the part.

Part B: Medical Insurance, including hospital outpatient

Part B is Medical Insurance. CMS describes it as covering physicians' services, outpatient hospital services, certain home health services, durable medical equipment, and other medical and health services not covered by Part A. Medicare.gov adds services from doctors and other health care providers, outpatient care, many preventive services, and yearly wellness visits.

For calendar year 2026, CMS set the standard monthly Part B premium at $202.90 and the annual Part B deductible at $283. After the deductible, Original Medicare generally pays 80 percent of the Medicare-approved amount for many Part B services, and the beneficiary pays 20 percent coinsurance. Hospital outpatient copayments are often set per service rather than as a single inpatient-style deductible. Medicare's hospital-benefits publication notes that the copayment for a single outpatient hospital service cannot be more than the inpatient hospital deductible, but multiple outpatient services can add up to more than that deductible.

This is the COC-critical map:

Hospital outpatient departments, emergency departments, and provider-based clinics live in Part B for the facility. That is why a same-day laparoscopic cholecystectomy in the hospital outpatient department is not billed as a Part A inpatient stay unless the patient is actually admitted as an inpatient. Observation is also an outpatient Part B service even when the patient occupies a bed overnight. The coder who sees a bed and assumes Part A will send the wrong type of bill.

Part D and self-administered drugs on outpatient claims

Part D is Medicare prescription drug coverage. It is a separate outpatient drug benefit, not a second name for hospital-administered infusions. CMS's partner tip sheet on billing for self-administered drugs given in outpatient settings (product 11331-P) is the facility intersection that belongs on a COC exam.

People often need home-style medications in the emergency department, observation, surgery, or pain clinic: an oral beta blocker, an oral antibiotic, a usual home dose of a maintenance drug. Medicare Part B covers only certain drugs in these settings, such as drugs given by infusion. Self-administered drugs that are not covered under Part A or Part B are not converted into payable OPPS lines just because the hospital dispensed them. Hospitals should bill people enrolled in Medicare drug plans for those self-administered drugs when they are not covered under Part A or Part B. Only hospital pharmacies that dispense to outpatients and have contracts with Part D plans should bill those plans directly as in-network pharmacies. Otherwise the patient may pay the hospital and seek limited Part D reimbursement, subject to formulary, out-of-network, and documentation rules.

On the institutional claim, those charges belong with pharmacy revenue lines and, when they are not covered by Part A or Part B, in noncovered charges so they are not treated as covered outpatient drugs. Exact four-digit pharmacy subcategories are National Uniform Billing Committee (NUBC) values and can vary by chargemaster; 0250 is the general pharmacy family. Do not use this section to learn OPPS drug status indicators or the separately payable drug threshold; those are the next chapter.

Outpatient-hospital scenario

A 72-year-old with Original Medicare plus a stand-alone Part D plan arrives at the emergency department with right-upper-quadrant pain. Ultrasound confirms gallstones. The surgeon performs a laparoscopic cholecystectomy the same day in the hospital outpatient operating room. The patient is never admitted as an inpatient. She receives an IV antibiotic in the operating room and her usual oral antihypertensive while waiting in outpatient recovery because she did not bring the home bottle.

The hospital's facility claim is a Part B outpatient institutional claim (type of bill 13X), not a Part A inpatient claim. The IV antibiotic given as part of the procedure is evaluated under Part B outpatient drug rules and OPPS packaging, which the next chapter covers. The oral antihypertensive is a self-administered drug that is not a typical Part B covered outpatient hospital drug; it is the Part D intersection, usually a patient-liability or Part D issue rather than a covered OPPS drug line. The surgeon's work is also Part B, but it travels on a professional claim, not on the hospital's UB-04. If this same patient had instead been enrolled in a Medicare Advantage HMO, both the hospital and the surgeon would still report ICD-10-CM, CPT, and any needed HCPCS Level II codes, but they would send the claims to the MA plan rather than to the A/B MAC.