2.1 Medicare Parts A, B, C, D
Key Takeaways
- Medicare Part A covers inpatient hospital, skilled nursing facility, hospice, and home health care; most beneficiaries pay no Part A premium because it is funded by payroll taxes.
- Medicare Part B covers outpatient and physician services, is premium-based ($202.90 standard monthly premium in 2026), and pays 80% of the approved amount after a $283 annual deductible.
- Medicare Part C (Medicare Advantage) is a private plan that replaces Original Medicare Parts A and B and usually bundles Part D drug coverage.
- Medicare Part D is the prescription drug benefit; the Inflation Reduction Act eliminated the coverage gap and set a $2,100 out-of-pocket cap for 2026.
- Medicare eligibility starts at age 65, or earlier with End-Stage Renal Disease (ESRD), ALS, or 24 months of Social Security Disability Insurance (SSDI).
Why Medicare Matters for Billers
Quick Answer: Medicare has four parts. Part A is hospital insurance, Part B is medical insurance, Part C (Medicare Advantage) is a private bundled plan, and Part D is prescription drug coverage. The CPB exam expects you to match a service to the correct part and apply the right cost-sharing.
Medicare is the federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS). It is one of the most heavily tested payers on the CPB exam because its rules differ sharply from commercial insurance. A biller who misroutes a claim or misapplies cost-sharing creates denials, delayed payment, and compliance exposure.
The Four Parts of Medicare
| Part | Common Name | Covers | Cost-Sharing (2026) |
|---|---|---|---|
| A | Hospital Insurance | Inpatient hospital, skilled nursing facility (SNF), hospice, some home health | $1,736 deductible per benefit period; $0 premium for most |
| B | Medical Insurance | Physician services, outpatient care, durable medical equipment, preventive services | $283 annual deductible, then 20% coinsurance; $202.90 standard premium |
| C | Medicare Advantage | A private plan that replaces Parts A and B, usually with Part D | Plan-specific copays, deductibles, and out-of-pocket maximum |
| D | Prescription Drug | Outpatient prescription drugs | Plan-specific; $2,100 out-of-pocket cap for 2026 |
Part A — Hospital Insurance
Part A is financed primarily through the Medicare payroll tax. Beneficiaries who paid the tax for at least 40 quarters (about 10 years of work) receive premium-free Part A. Part A cost-sharing is built around the benefit period, which starts on admission and ends after 60 consecutive days out of a hospital or SNF. For 2026, the inpatient deductible is $1,736 per benefit period, with daily coinsurance of $434 for days 61-90 and $868 for lifetime reserve days. SNF care is fully covered for days 1-20 and carries a $217 daily coinsurance for days 21-100.
Part B — Medical Insurance
Part B is voluntary and premium-based. After the patient meets the $283 annual deductible, Medicare pays 80% of the Medicare-approved amount and the patient is responsible for the remaining 20% coinsurance. The standard 2026 monthly premium is $202.90, though higher-income beneficiaries pay an Income-Related Monthly Adjustment Amount (IRMAA).
Part C — Medicare Advantage
Part C plans are offered by private insurers approved by CMS. When a patient elects Medicare Advantage, claims go to the private plan, not to Original Medicare. Billers must verify plan enrollment at each visit because patients can switch during enrollment periods.
Part D — Prescription Drugs
Part D is delivered through stand-alone drug plans or bundled into Medicare Advantage. The Inflation Reduction Act eliminated the old "donut hole" coverage gap and, for 2026, sets a $2,100 annual out-of-pocket cap and continues the $35 monthly insulin copay limit.
Who Is Eligible
Medicare eligibility is not limited to seniors. A person qualifies at age 65, or earlier through disability. Individuals receiving SSDI for 24 months, those with End-Stage Renal Disease (ESRD), and those diagnosed with Amyotrophic Lateral Sclerosis (ALS) all qualify. ALS beneficiaries are exempt from the 24-month waiting period.
A patient is admitted as an inpatient. Which part of Medicare covers the hospital stay?
After the Part B deductible is met, what percentage of the Medicare-approved amount is the patient responsible for?
Which condition allows a person under 65 to qualify for Medicare without the 24-month SSDI waiting period?