13.1 Medicare Parts A, B, C, and D

Medicare is the federal health insurance program for people age 65 and older, individuals 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). It is administered by the Centers for Medicare & Medicaid Services (CMS) and funded primarily through payroll taxes (FICA) and beneficiary premiums.

"Original Medicare" refers to Part A and Part B together. Parts C and D are delivered through private insurers that contract with CMS. Exam questions hinge on knowing exactly which part pays for which service.

The Four Parts of Medicare

Part A: Hospital Insurance

Most beneficiaries pay no Part A premium because they (or a spouse) earned 40 quarters of Medicare-covered employment (10 years). Those with 30-39 quarters pay a reduced premium; fewer than 30 quarters pay the full premium.

Part A uses a benefit period, which begins the day you are admitted as an inpatient and ends after 60 consecutive days without inpatient hospital or SNF care. A new benefit period means a new deductible.

2025 Part A Cost-Sharing

Trap: SNF coverage requires a prior qualifying 3-day inpatient hospital stay and a skilled-care need. Part A never pays for purely custodial long-term care.

Enrollment Penalties, Special Enrollment, and a Coverage-Coordination Drill

Medicare's penalties and election windows generate predictable exam numerics, so connect each to its part. The Part B late-enrollment penalty adds 10% for each full 12-month period the beneficiary went without Part B while eligible, and it lasts for life. The Part D penalty adds roughly 1% of the national base beneficiary premium per month without creditable drug coverage. A Special Enrollment Period (SEP) lets someone who delayed Part B because of active employer group coverage enroll later without penalty.

Election windows side by side

Worked penalty example

A beneficiary eligible at 65 but enrolls in Part B 30 months late with no employer coverage. Thirty months contains two full 12-month periods, so the penalty is 2 x 10% = 20% added to the Part B premium for life. Had the delay been due to active employer coverage, an SEP would have let them enroll penalty-free. The exam rewards distinguishing a penalty-triggering voluntary delay from a penalty-exempt SEP delay tied to employer coverage.

Part B: Medical Insurance

Part B is voluntary and requires a monthly premium. The 2025 standard premium is $185/month, with higher-income beneficiaries paying an Income-Related Monthly Adjustment Amount (IRMAA). After the annual deductible ($257 in 2025), Medicare generally pays 80% of the Medicare-approved amount and the beneficiary pays the remaining 20% coinsurance with no out-of-pocket maximum.

Part B covers physician services, outpatient surgery, lab tests, durable medical equipment (DME), ambulance, and most preventive screenings (many at 100% with no cost-sharing).

Enrollment Periods

• Initial Enrollment Period (IEP): 7 months — 3 months before, the month of, and 3 months after the 65th-birthday month.
• General Enrollment Period (GEP): January 1 - March 31 each year.
• Late-enrollment penalty: Part B premium rises 10% for each full 12 months the person could have enrolled but did not, lasting for life.

Parts C and D

Part C (Medicare Advantage) plans must cover everything Original Medicare covers and usually add an out-of-pocket maximum plus extras (dental, vision). Members still pay the Part B premium. Part D drug plans use a defined cost-sharing structure; the late-enrollment penalty is 1% of the national base premium per month without creditable coverage.

Medicare Advantage plans typically use provider networks (HMO or PPO) and may require referrals or prior authorization, unlike Original Medicare, which lets a beneficiary see any provider that accepts Medicare. A beneficiary may switch between Original Medicare and Medicare Advantage during the Annual Election Period each fall (October 15 - December 7) and during the Medicare Advantage Open Enrollment Period (January 1 - March 31).

Comparing Original Medicare and Medicare Advantage

Under Part D, plans set a deductible, an initial coverage phase, and catastrophic coverage. Since 2025, federal reform caps total annual out-of-pocket drug spending at $2,000, after which the beneficiary pays nothing for covered drugs for the rest of the year. "Creditable coverage" means drug coverage at least as good as Medicare's, and maintaining it avoids the Part D late-enrollment penalty.