16.1 Medicare Parts A and B (Original Medicare)
Key Takeaways
- Original Medicare = Part A (Hospital Insurance) + Part B (Medical Insurance), administered by CMS.
- The Initial Enrollment Period is a 7-month window centered on the 65th birthday month.
- Part A cost-sharing runs by benefit period (new deductible after 60 days out); the deductible is $1,676.
- Part B is voluntary, costs a monthly premium, and pays 80% after a $257 deductible with no out-of-pocket cap.
- Active employer coverage lets a worker delay Part B and use an 8-month Special Enrollment Period without penalty.
Medicare Parts A and B (Original Medicare)
Medicare is the federal health program administered by the Centers for Medicare and Medicaid Services (CMS) for people age 65 or older, people who have received Social Security Disability Insurance (SSDI) for 24 months, and people with End-Stage Renal Disease (ESRD) or Amyotrophic Lateral Sclerosis (ALS).
The combination of Part A (Hospital Insurance) and Part B (Medical Insurance) is called Original Medicare. It is the fee-for-service backbone that every other product on the exam attaches to, so master its cost-sharing first.
Eligibility and the Initial Enrollment Period (IEP)
The Initial Enrollment Period is a 7-month window: the 3 months before the month you turn 65, the birthday month, and the 3 months after. Enrolling late in Part B without creditable coverage triggers a permanent 10% premium penalty for each full 12-month period you could have had it.
| Enrollment window | Length | Trap to recognize |
|---|---|---|
| Initial Enrollment Period (IEP) | 7 months around the 65th birthday | Sign up before the birthday month to avoid a coverage gap |
| General Enrollment Period (GEP) | Jan 1 - Mar 31 each year | Used only if the IEP was missed; late penalty may apply |
| Special Enrollment Period (SEP) | 8 months after employer coverage ends | Avoids the Part B late penalty for active workers |
Exam Tip: Part B is voluntary and carries a monthly premium. A person who keeps working past 65 under employer group coverage can delay Part B without penalty and use a Special Enrollment Period later.
Part A: Hospital Insurance
Part A covers inpatient hospital care, skilled nursing facility (SNF) care, hospice, and limited home health care. Most people pay no premium for Part A because they (or a spouse) earned 40 quarters (10 years) of Medicare-taxed work.
Part A cost-sharing runs by benefit period, not by calendar year. A benefit period starts on admission and ends after the insured has been out of a hospital or SNF for 60 consecutive days. A new benefit period means a new deductible - so a person hospitalized three separate times with long gaps could pay the deductible three times.
| Part A cost item | Amount | Rule |
|---|---|---|
| Inpatient deductible | $1,676 | Per benefit period |
| Days 1-60 | $0 coinsurance | After the deductible |
| Days 61-90 | $419/day | Per benefit period |
| Days 91-150 | $838/day | Uses the 60 lifetime reserve days (never renew) |
| SNF days 21-100 | $209.50/day | Requires a qualifying 3-day hospital stay |
Worked numeric: A patient is hospitalized for 65 days in one benefit period. They owe the $1,676 deductible plus 5 days x $419 = $2,095 coinsurance, totaling $3,771.
Key Point: Part A pays for skilled care, never long-term custodial care. The lifetime psychiatric inpatient limit is 190 days.
Part B: Medical Insurance
Part B covers physician services, outpatient care, durable medical equipment (DME), lab tests, and many preventive services. It is voluntary and requires a monthly premium (standard $185 in 2025; higher under the Income-Related Monthly Adjustment Amount, IRMAA).
After a small annual deductible of $257, Part B pays 80% of the Medicare-approved amount and the beneficiary pays the remaining 20% coinsurance with no out-of-pocket maximum - the gap that Medigap exists to fill.
| Part B feature | 2025 figure |
|---|---|
| Standard monthly premium | $185 |
| Annual deductible | $257 |
| Medicare pays | 80% of approved amount |
| Beneficiary pays | 20% coinsurance (no cap) |
Worked numeric: A beneficiary incurs $5,257 in approved Part B charges for the year. They pay the $257 deductible, leaving $5,000; Medicare pays 80% = $4,000 and the beneficiary owes 20% = $1,000 in coinsurance.
Part B does not cover routine dental, vision, hearing aids, or most outpatient prescription drugs (Part D handles those).
Quick scenario
A 64-year-old who is still working and covered by a large employer plan should usually take premium-free Part A but delay Part B, then use the 8-month Special Enrollment Period when employment ends to avoid the lifetime late penalty.
A Medicare beneficiary is hospitalized for 64 days within a single benefit period in 2025. Ignoring any supplement, what does the beneficiary owe out of pocket?
A worker turns 65 but keeps active coverage under a large employer group plan. Which statement is correct under the enrollment rules in this section?