2.1 Medicare Parts A, B, C, D

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 Certified Professional Biller (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 CPB exam is a 135-question, open-book exam scored on a 70% passing threshold, and a large block of those items targets payer-specific rules like the ones below.

The Four Parts of Medicare

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. A patient can have several benefit periods in one year, paying a new deductible each time.

For 2026, the inpatient deductible is $1,736 per benefit period, with daily coinsurance of $434 for days 61-90 and $868 for each of the 60 lifetime reserve days. SNF care is fully covered for days 1-20 and carries a $217 daily coinsurance for days 21-100, with no coverage past day 100. Memorize this ladder: $0 (days 1-60 after the deductible), then $434, then $868.

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) added to that premium. Most preventive services — annual wellness visits, many screenings, and approved vaccines — are covered at 100% with no deductible or coinsurance, a frequent exam distinction from ordinary Part B services.

Part B also covers durable medical equipment (DME) like walkers and wheelchairs, outpatient mental health, diagnostic lab and imaging, and physician services in any setting, including the professional component of inpatient physician visits.

A worked example: a patient sees a physician who bills $200 for a service Medicare approves at $150, the deductible is already met. Medicare pays 80% of $150 ($120) and the patient owes the 20% coinsurance ($30). The $50 difference between the charge and the approved amount is a contractual write-off for a participating provider — the patient is never billed for it.

Part C — Medicare Advantage

Part C plans are offered by private insurers approved by CMS and must cover at least everything Original Medicare covers. When a patient elects Medicare Advantage, claims go to the private plan, not to Original Medicare. A common exam trap: a biller who sends an Advantage patient's claim to the Medicare Administrative Contractor (MAC) gets a rejection because the beneficiary is enrolled in a private plan. Advantage plans set their own provider networks, copays, prior-authorization rules, and an annual out-of-pocket maximum (which Original Medicare lacks).

Billers must verify plan enrollment at each visit because patients can switch during the Annual Election Period (Oct 15 - Dec 7) or the Medicare Advantage Open Enrollment Period (Jan 1 - Mar 31). The patient's red-white-and-blue card means Original Medicare; an Advantage plan issues its own member card.

Part D — Prescription Drugs

Part D is delivered through stand-alone Prescription Drug Plans (PDPs) or bundled into Medicare Advantage (an MA-PD plan). The Inflation Reduction Act eliminated the old "donut hole" coverage gap and, for 2026, sets a $2,100 annual out-of-pocket cap, a maximum $615 deductible, 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 (the standard waiting period).
• Those with End-Stage Renal Disease (ESRD) — kidney failure requiring dialysis or transplant.
• Those diagnosed with Amyotrophic Lateral Sclerosis (ALS), who are exempt from the 24-month wait and qualify the month disability benefits begin.

Knowing the pathway matters because it tells the biller whether Medicare is even the correct payer and whether a Medicare Secondary Payer rule (covered in 2.6) may apply. For example, a 67-year-old who is still actively working at an employer with 20+ employees and is covered by that group health plan will have Medicare pay secondary, not primary.

Putting the Parts Together

When you read an exam scenario, identify the setting first, then the part: an inpatient hospital stay is Part A; an outpatient surgery, office visit, or DME item is Part B; a service rendered through a private bundled plan is Part C; and a retail prescription is Part D. Then apply the matching cost-sharing — the benefit-period deductible and day-based coinsurance ladder for Part A, the annual deductible plus 20% for Part B, and plan-specific amounts for C and D.

Mismatching the setting to the part is the single most common Medicare error the CPB exam tests, so anchor on where and how the service was delivered before you pick a payer or calculate patient responsibility.