13.1 Medicare Parts A, B, C, and D
Key Takeaways
- Medicare eligibility is age- or disability-based (65+, 24 months of SSDI, or ESRD/ALS), never income-based.
- Part A uses benefit periods (new deductible after 60 days out); Part B pays 80% after deductible with no out-of-pocket cap.
- Premium-free Part A requires 40 quarters (10 years) of Medicare-taxed work.
- Part C (Medicare Advantage) bundles A+B+often D through private plans and adds an out-of-pocket max; Part D capped drug costs at $2,000 in 2025.
- Late enrollment penalties are permanent: Part B is 10% per 12-month delay, Part D is 1% of the base premium per month.
Medicare Overview
Medicare is the federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS). It covers three eligibility groups: people age 65 or older, people under 65 who have received Social Security Disability Insurance (SSDI) for 24 months, and people of any age with End-Stage Renal Disease (ESRD) or ALS (Lou Gehrig's disease). Exam questions hinge on knowing that Medicare is age- or disability-based, not income-based — that distinction separates it from Medicaid.
The Four Parts
Medicare is organized into four parts. Parts A and B together are called Original Medicare (run by the government). Parts C and D are delivered through private insurers approved by Medicare.
| Part | Common Name | Covers | Premium |
|---|---|---|---|
| A | Hospital Insurance | Inpatient hospital, SNF, hospice, some home health | Usually $0 (premium-free if 40+ work quarters) |
| B | Medical Insurance | Physician visits, outpatient care, DME, preventive | Standard monthly premium (income-adjusted via IRMAA) |
| C | Medicare Advantage | A+B (and usually D) via private HMO/PPO plans | Plan premium + Part B premium |
| D | Prescription Drugs | Outpatient prescription medications | Plan premium (income-adjusted) |
A premium-free Part A requires the worker (or spouse) to have paid Medicare payroll taxes for at least 40 quarters (10 years) of work.
Part A: Hospital Insurance
Part A uses a benefit period structure, not a calendar year. A benefit period begins on admission and ends after the patient has been out of a hospital or skilled nursing facility (SNF) for 60 consecutive days. A new benefit period means a new deductible — a patient hospitalized three separate times in one year could pay three deductibles.
Worked Example — Inpatient Cost-Sharing (2025)
Using 2025 figures, a single benefit period works like this:
- Days 1–60: Pay the inpatient deductible of $1,676, then $0 coinsurance.
- Days 61–90: $419/day coinsurance.
- Days 91+: $838/day using lifetime reserve days (60 total, non-renewable).
- Beyond reserve days: Patient pays 100%.
If a patient stays 75 days, they pay the $1,676 deductible plus 15 days × $419 = $6,285, for a total of $7,961. Trap: the deductible is per benefit period, not annual, and Part A covers hospice and SNF (after a qualifying 3-day inpatient stay) but not long-term custodial care.
A Medicare patient is hospitalized for 70 days in a single benefit period. Using 2025 figures ($1,676 deductible; $419/day coinsurance for days 61–90), what is their total out-of-pocket cost?
Part B: Medical Insurance
Part B is voluntary and requires a monthly premium from everyone (the 2025 standard premium is income-adjusted upward by IRMAA for high earners). After the annual deductible, Medicare generally pays 80% of the Medicare-approved amount and the beneficiary pays 20% coinsurance, with no out-of-pocket maximum — a key gap that Medigap is designed to fill.
Assignment and Excess Charges
Providers who accept assignment agree to the Medicare-approved amount as payment in full. Non-participating providers may bill up to a 15% limiting charge above the approved amount — this excess charge is what Medigap Plans F and G can cover.
Preventive Services
Many preventive services (annual wellness visit, mammograms, flu shots, certain screenings) are covered at 100% with no deductible or coinsurance. Memorize that Part B covers durable medical equipment (DME), outpatient physician services, and ambulance — but not routine dental, vision, hearing aids, or most outpatient drugs.
Part C: Medicare Advantage
Medicare Advantage (MA / Part C) bundles Part A and Part B (usually plus Part D) into a single private plan — HMO, PPO, Private Fee-for-Service (PFFS), or Special Needs Plan (SNP). To enroll you must already have Parts A and B and live in the plan's service area. Unlike Original Medicare, MA plans include an annual out-of-pocket maximum, but they use provider networks and prior authorization.
Part D: Prescription Drugs
Part D is private, voluntary outpatient drug coverage. A major 2025 reform eliminated the coverage gap ("donut hole") and introduced a hard $2,000 annual out-of-pocket cap. Once a beneficiary spends $2,000 on covered drugs, they pay $0 for the rest of the year.
Late Enrollment Penalties (Trap)
Both Part B and Part D impose permanent late penalties if you delay without creditable coverage:
- Part B: 10% of the premium for each full 12-month period delayed (lasts for life).
- Part D: 1% of the national base premium × number of full months without coverage.
Which statement about Medicare Part C (Medicare Advantage) is TRUE?
Medicare Eligibility, Enrollment Windows, and Cost-Sharing
Medicare is the federal program for people 65+, those receiving Social Security disability for 24 months, and people with ESRD or ALS. The four parts:
| Part | Covers | Premium |
|---|---|---|
| A — Hospital | Inpatient hospital, SNF, hospice, some home health | Usually premium-free (40+ work quarters) |
| B — Medical | Doctor visits, outpatient, durable equipment | Monthly premium; annual deductible |
| C — Medicare Advantage | A/B (often D) via private plans | Replaces Original Medicare; network-based |
| D — Prescription drugs | Outpatient Rx | Private plans; premium + cost-share |
Enrollment Periods (Tested)
- Initial Enrollment Period (IEP) — 7 months: 3 months before, the month of, and 3 months after the 65th birthday.
- General Enrollment Period (GEP) — Jan 1-Mar 31 for those who missed IEP (late-enrollment penalty may apply).
- Annual Election Period (AEP) — Oct 15-Dec 7 to change Part C/D.
- Special Enrollment Period (SEP) — for those who delayed Part B due to active group coverage, avoiding the penalty.
Worked Part A Hospital Math (illustrative)
Part A uses a benefit period (starts at admission, ends after 60 days out of a facility). The insured pays one Part A deductible (~$1,676 in 2025) per benefit period covering days 1-60; days 61-90 carry a daily coinsurance; days 91+ draw on 60 lifetime reserve days. After lifetime reserve days are exhausted, the patient pays all costs — the gap that Medicare Supplement (Medigap) plans are designed to fill.
Part B generally pays 80% of approved charges after its deductible, leaving the 20% coinsurance with no out-of-pocket cap under Original Medicare — the single biggest reason beneficiaries buy Medigap or enroll in Part C.