13.1 Medicare Parts A, B, C, and D
Key Takeaways
- Part A is premium-free with 40 quarters of work and pays per benefit period, not per year.
- Part B costs $185.00/month in 2025 with a $257 deductible and 20% coinsurance.
- Part C requires Parts A and B; Part D caps 2025 out-of-pocket at $2,000.
- Late-enrollment penalties for Parts B and D are lifetime additions to the premium.
- COBRA and retiree coverage are not creditable for delaying Medicare enrollment.
Medicare is the federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS). It covers people age 65 and older, certain individuals under 65 receiving Social Security Disability Insurance (SSDI), and people with End-Stage Renal Disease (ESRD) or ALS. Exam questions hinge on which of the four parts pays a given claim, the enrollment windows, and the lifetime late-enrollment penalties.
The Four Parts
| Part | Common Name | What It Covers |
|---|---|---|
| A | Hospital Insurance | Inpatient hospital, skilled nursing, hospice, limited home health |
| B | Medical Insurance | Physician visits, outpatient care, preventive services, DME |
| C | Medicare Advantage | Private plans bundling A + B (usually D and extras) |
| D | Prescription Drug | Outpatient prescription medications |
Parts A and B together are called "Original Medicare." Part C is an alternative delivery system run by private insurers, not a separate set of benefits.
Part A: Hospital Insurance
Most beneficiaries pay no Part A premium because they accumulated 40 quarters (10 years) of Medicare-taxed work. Part A pays per benefit period, which begins on admission and ends after 60 consecutive days out of a hospital or skilled nursing facility.
| Inpatient Days | 2025 Cost-Sharing |
|---|---|
| Days 1-60 | $1,676 deductible, then $0 |
| Days 61-90 | $419/day coinsurance |
| Days 91-150 | $838/day (60 lifetime reserve days) |
| Beyond 150 | Beneficiary pays all costs |
Skilled nursing facility (SNF) care requires a qualifying 3-day inpatient stay: days 1-20 are free, days 21-100 cost $209.50/day, and there is no SNF coverage beyond 100 days. Part A does NOT pay custodial long-term care.
Part B: Medical Insurance
Everyone pays a Part B premium ($185.00/month standard in 2025), an annual deductible ($257), then 20% coinsurance. Higher earners pay an Income-Related Monthly Adjustment Amount (IRMAA) surcharge based on income from two years prior. Most preventive services are covered 100%.
Worked Penalty Example
The Part B late-enrollment penalty is 10% of the premium for each full 12-month period a person went without creditable coverage, added for life.
- Delay of 3 full years = 3 x 10% = 30% penalty.
- 30% x $185.00 = an extra $55.50 every month for life.
Trap: COBRA and retiree coverage are NOT creditable employer coverage for Medicare. Relying on them past the Initial Enrollment Period triggers the penalty.
Enrollment Periods
Timing drives most penalty questions. Memorize the four windows and what each one does.
| Period | Dates | Function |
|---|---|---|
| Initial Enrollment (IEP) | 7 months around 65th birthday | First-time A/B sign-up |
| General Enrollment (GEP) | Jan 1 - Mar 31 | Missed IEP; coverage starts July 1 |
| Annual Enrollment (AEP) | Oct 15 - Dec 7 | Change C/D plans; effective Jan 1 |
| Special Enrollment (SEP) | Varies (often 8 months) | Loss of active employer coverage |
The IEP is a 7-month band: the 3 months before the birthday month, the birthday month itself, and the 3 months after. Enrolling early (before the birthday month) means coverage starts the first day of the birthday month; waiting until after delays the start.
Part B Cost-Sharing Detail
Providers who accept assignment take the Medicare-approved amount as full payment, so the beneficiary owes only the 20% coinsurance. A non-participating provider may bill up to a 15% limiting charge above the approved amount, which the patient pays out of pocket. Opt-out providers bill the patient in full with no Medicare payment.
Parts C and D
Medicare Advantage (Part C) requires enrollment in BOTH Part A and Part B, and members keep paying the Part B premium. MA plans must cap annual out-of-pocket spending; Original Medicare has no out-of-pocket maximum. Plans are usually HMO (network and referrals) or PPO (out-of-network at higher cost), and most bundle Part D plus extras like dental, vision, and hearing.
Part D covers outpatient drugs through private plans, either standalone Prescription Drug Plans (PDPs) added to Original Medicare or MA-PD plans. Each plan uses a formulary with tiered copays and may impose prior authorization, step therapy, or quantity limits.
The 2025 Inflation Reduction Act redesign caps beneficiary out-of-pocket at $2,000, eliminates the old coverage gap ("donut hole"), and caps insulin at $35 per month. The benefit now has three phases: a deductible phase (up to $590), an initial coverage phase (25% cost-share), and a catastrophic phase ($0).
The Part D late-enrollment penalty is 1% of the $36.78 national base premium per uncovered month, added for life; 24 months late equals a 24% surcharge of about $8.83/month. The trigger is going 63 or more consecutive days without creditable drug coverage after the IEP.
A patient is in the hospital for 80 days during one benefit period in 2025. After the deductible, what coinsurance applies to days 61-80?
Which statement about Medicare Advantage (Part C) is correct?
Putting the Four Parts Together: Enrollment Windows and a Cost-Sharing Worked Example
Medicare's four parts each carry signature numbers, and the exam tests both the cost-sharing and the enrollment windows that gate them. A consolidated grid anchors the parts before the math.
| Part | Covers | Signature cost feature |
|---|---|---|
| A (Hospital) | Inpatient, SNF, hospice | Per-benefit-period deductible; premium-free for most |
| B (Medical) | Doctor, outpatient | Monthly premium; 20% coinsurance after deductible |
| C (Advantage) | A+B (often D) via private plan | Network rules; out-of-pocket max |
| D (Drugs) | Prescriptions | Premium; formulary tiers |
Enrollment windows are heavily tested: the Initial Enrollment Period spans 7 months (the 3 months before through the 3 months after the 65th-birthday month); the General Enrollment Period runs January 1–March 31 for those who missed it; and Special Enrollment Periods waive penalties for people who kept employer coverage past 65. Missing Part B without creditable coverage adds a 10% lifetime penalty per 12 months of delay — a recurring exam item.
Worked Part B cost-sharing example: after the annual Part B deductible is met, Medicare pays 80% of the approved amount and the beneficiary owes 20% with no cap (which is the gap Medigap fills). On a $2,000 approved outpatient charge, Medicare pays $1,600 and the beneficiary owes $400. Under Part A, by contrast, costs are structured around the benefit period: a beneficiary pays the inpatient deductible, then $0 per day for days 1–60, a daily coinsurance for days 61–90, and a higher coinsurance for lifetime reserve days thereafter.
The absence of an out-of-pocket cap in Original Medicare is exactly why beneficiaries add Medigap or choose a Part C Advantage plan, which does cap out-of-pocket spending.