16.2 Medicare Part C (Advantage) and Part D (Drug)

Medicare Part C (Advantage) and Part D (Drug)

Where Original Medicare (Parts A and B) is the government-run baseline, Part C and Part D are delivered by private insurers under contract with CMS. Producers sell these plans, so the exam expects you to know what each part does, how the parts interact, and the rules that protect beneficiaries from gaps and penalties.

Part C: Medicare Advantage

Medicare Part C, branded Medicare Advantage (MA), is an alternative to Original Medicare offered by private insurers. An MA plan must cover everything Part A and Part B cover (except hospice, which Part A still pays), and most plans bundle Part D drug coverage and add extras like dental, vision, hearing, and fitness benefits. Enrollees keep paying their Part B premium and may also pay an additional MA premium.

Because MA plans use provider networks, they look like commercial managed care. Common structures:

Unlike Original Medicare, MA plans must include an annual out-of-pocket maximum — a major selling point because Original Medicare has none.

Eligibility for MA: the person must have both Part A and Part B and live in the plan's service area. A beneficiary cannot have a Medicare Advantage plan and a Medigap policy at the same time — Medigap only works with Original Medicare. Selling a Medigap policy to someone enrolled in MA (except when they are about to disenroll) is a prohibited practice the exam flags as unsuitable.

Part D: Prescription Drug Coverage

Medicare Part D is voluntary outpatient prescription drug coverage sold by private insurers, either as a standalone Prescription Drug Plan (PDP) added to Original Medicare or built into an MA plan (MA-PD). Each plan publishes a formulary (covered-drug list) organized into tiers, and uses tools like prior authorization and step therapy. Plans must cover at least two drugs in each therapeutic class.

The Part D benefit phases and the redesigned cap

Historically Part D had a 'donut hole' (coverage gap) where beneficiaries paid much more after initial coverage. As of 2025-2026 the coverage gap is eliminated and replaced by a hard annual out-of-pocket cap (about $2,000 in 2025, indexed thereafter). After a beneficiary's true out-of-pocket spending reaches the cap, they pay $0 for covered Part D drugs the rest of the year — a frequently tested update.

Simplified 2026-style Part D phases:

Many plans now also offer the Medicare Prescription Payment Plan, letting members spread their out-of-pocket costs across the year in monthly installments.

Late-enrollment penalty and creditable coverage

If a beneficiary goes 63 or more consecutive days without creditable prescription drug coverage (coverage at least as good as Part D) after their initial eligibility, they incur a Part D late-enrollment penalty added to the premium for life. Employer drug coverage that is certified 'creditable' protects the beneficiary — this mirrors the Part B penalty logic and is a common compare-and-contrast question.

Key enrollment windows

The Annual Election Period (AEP), October 15 - December 7, lets beneficiaries join, switch, or drop MA and Part D plans for a January 1 effective date. The Medicare Advantage Open Enrollment Period (MA-OEP), January 1 - March 31, lets current MA enrollees switch MA plans once or return to Original Medicare (with a PDP). Don't confuse AEP (everyone) with MA-OEP (MA enrollees only).

Worked scenario

Roberto turns 65, has Original Medicare, and skips Part D for 20 months while having no drug coverage. When he finally enrolls, his penalty is roughly 1% of the national base beneficiary premium per uncovered month (about 20%), added permanently. Compare a coworker who kept creditable employer drug coverage during the same gap: she enrolls later with no penalty, because creditable coverage stops the penalty clock.