13.1 Medicare Parts A, B, C, and D

Medicare overview

Medicare is the federal health program administered by the Centers for Medicare & Medicaid Services (CMS) for people age 65 or older, people under 65 who have received Social Security Disability Insurance (SSDI) for 24 months, and people with End-Stage Renal Disease (ESRD) or ALS (Lou Gehrig's disease). Eligibility for premium-free Part A requires 40 quarters (10 years) of Medicare-covered employment by the individual or spouse.

Medicare has four parts. Parts A and B together form Original Medicare, the fee-for-service government plan. Part C (Medicare Advantage) and Part D (drug coverage) are delivered through private insurers that contract with CMS. Exam questions frequently test which part covers a given service and the cost-sharing amounts, so memorize the structure below.

Part A — Hospital Insurance

Part A covers inpatient hospital care, skilled nursing facility (SNF) care, home health, and hospice. It is generally premium-free if the work-quarter test is met. Part A uses a benefit period, which begins on hospital admission and ends after the insured has been out of a hospital or SNF for 60 consecutive days.

• Hospital deductible: one per benefit period (roughly $1,600+); covers days 1–60.
• Days 61–90: daily coinsurance applies.
• Days 91–150: 60 lifetime reserve days at higher coinsurance, used once.
• SNF: days 1–20 fully covered; days 21–100 coinsurance; nothing after 100. Requires a prior 3-day inpatient stay.

A key trap: Part A does not pay for long-term custodial nursing-home care.

Part B — Medical Insurance

Part B is voluntary and requires a monthly premium (standard around $175, higher for high earners via IRMAA). It covers physician services, outpatient care, lab tests, durable medical equipment (DME), and preventive services. After a small annual deductible, Medicare pays 80% of the approved amount and the insured pays the remaining 20% coinsurance with no out-of-pocket maximum.

Worked example: A Medicare-approved outpatient procedure costs $4,000 and the Part B deductible is already met. Part B pays 80% = $3,200; the insured owes 20% = $800. Because there is no cap, this 20% gap is exactly what Medigap is designed to fill (Section 13.2).

Enrollment periods and the late-enrollment penalty

Failing to enroll in Part B when first eligible (without creditable employer coverage) triggers a 10% premium surcharge for each full 12-month period of delay, lasting as long as the person has Part B. The Part D late penalty is 1% of the national base premium per month without creditable drug coverage.

Part C — Medicare Advantage and Part D — Drug Coverage

Part C (Medicare Advantage) plans (HMOs, PPOs) are sold by private insurers and must cover everything Original Medicare covers (except hospice, still under Part A) and usually bundle Part D drug coverage plus extras such as dental or vision. The enrollee must keep paying the Part B premium. MA plans have provider networks and an annual out-of-pocket maximum, which Original Medicare lacks.

Part D provides outpatient prescription-drug coverage through stand-alone PDPs or MA-PD plans. Historically Part D had a coverage gap ("donut hole"); recent law caps annual out-of-pocket drug spending. To enroll in Part D or Part C, the person must first be enrolled in Part A and/or Part B.

Coordination, exclusions, and exam traps

Medicare is generally secondary to an active employer group health plan when the employer has 20 or more employees, and primary for smaller employers — coordination-of-benefits questions test which payer pays first. When Medicare is secondary, the group plan pays first and Medicare may pick up remaining approved charges.

Watch these recurring traps on the national exam:

• Custodial care (help with daily living only) is excluded from all parts of Medicare.
• Routine dental, vision, hearing aids, and most care outside the U.S. are not covered by Original Medicare.
• Hospice is always a Part A benefit, even for someone enrolled in a Part C plan.
• A person can have either Original Medicare + Medigap or a Medicare Advantage plan — not Medigap layered on Part C.

Medicare also offers Extra Help (Low-Income Subsidy) for Part D premiums and cost-sharing for qualifying low-income beneficiaries, an important point when discussing affordability with seniors who may also qualify for Medicaid.

Original Medicare versus Medicare Advantage — the producer's decision

A central senior-market conversation is whether the client should keep Original Medicare (often paired with Medigap and a stand-alone Part D plan) or enroll in a Medicare Advantage (Part C) plan. Each path has distinct trade-offs the exam expects you to articulate.

A client who travels widely or wants any-doctor access usually fits Original Medicare plus Medigap; a budget-focused client comfortable with a network may prefer Medicare Advantage. The producer documents this suitability analysis. Switching between the two later may require health underwriting for Medigap if the one-time guaranteed-issue window has passed, so the initial choice carries long-term consequences that must be disclosed clearly.