16.1 Medicare Parts A and B (Original Medicare)
Key Takeaways
- Original Medicare = Part A (hospital, inpatient) + Part B (medical, outpatient); it has NO annual out-of-pocket maximum.
- Part A is usually premium-free with 40 quarters of work and uses benefit periods (60-day reset, new deductible) rather than calendar years.
- Part B is optional, charges a premium plus IRMAA surcharges, and pays 80% with 20% coinsurance after the deductible.
- The Initial Enrollment Period is the 7-month window around age 65; missing it can trigger a 10%-per-year lifetime Part B penalty.
- Eligibility also covers SSDI recipients after 24 months and any-age ESRD or ALS patients.
Medicare Parts A and B: Original Medicare
Medicare is the federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS). It covers three 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 Amyotrophic Lateral Sclerosis (ALS). Exam questions test eligibility triggers, not just age 65.
Original Medicare is the fee-for-service program made up of Part A (Hospital Insurance) and Part B (Medical Insurance). A beneficiary may use any provider that accepts Medicare, with no networks. Original Medicare has no annual out-of-pocket maximum, which is the single most-tested gap that Medicare Supplement (Medigap) policies exist to fill.
Part A: Hospital Insurance
Part A covers inpatient care: hospital stays, skilled nursing facility (SNF) care, hospice, and limited home health services. Most people receive Part A premium-free because they or a spouse paid Medicare (FICA) taxes for at least 40 quarters (10 years) of work.
Key scope rules tested on the exam:
- SNF care is covered only after a qualifying 3-day inpatient hospital stay, and only for skilled (not custodial) care.
- Hospice requires a terminal prognosis of 6 months or less.
- Inpatient psychiatric care is limited to a 190-day lifetime maximum.
- Part A does NOT cover most long-term custodial care — that is what Long-Term Care (LTC) insurance is for.
Trap: Custodial care (help with bathing, dressing, eating) is excluded even inside a facility. Coverage hinges on the care being skilled, not on where it is delivered.
Part A Cost-Sharing and Benefit Periods
Part A cost-sharing is organized by benefit period, not by calendar year. A benefit period begins the day of inpatient admission and ends after the beneficiary has been out of a hospital or SNF for 60 consecutive days. A new admission after that 60-day break starts a new benefit period and a new deductible — there is no annual limit on the number of benefit periods.
| Part A Cost | Illustrative Amount |
|---|---|
| Inpatient hospital deductible | ~$1,676 per benefit period |
| Days 1-60 | $0 coinsurance (deductible only) |
| Days 61-90 | ~$419/day coinsurance |
| Days 91-150 (lifetime reserve) | ~$838/day; 60 reserve days, used once |
| Beyond 150 days | Beneficiary pays all costs |
| SNF days 1-20 | $0 coinsurance |
| SNF days 21-100 | ~$209.50/day coinsurance |
| SNF beyond 100 days | Beneficiary pays all costs |
Worked example: A patient is hospitalized for 95 days in one benefit period. They pay the deductible (~$1,676), $0 for days 1-60, ~$419 × 30 days (days 61-90) = ~$12,570, then dip into lifetime reserve for days 91-95 at ~$838 × 5 = ~$4,190. The 5 reserve days are permanently gone from the 60-day lifetime pool.
Part B: Medical Insurance
Part B covers outpatient and physician services: doctor visits, outpatient surgery, lab tests, durable medical equipment (DME) like wheelchairs, ambulance, and preventive services. Part B is optional and requires a monthly premium (the standard premium with IRMAA — Income-Related Monthly Adjustment Amount surcharges for higher earners).
Part B cost mechanics, frequently tested:
- An annual deductible (~$257) applies once per calendar year.
- After the deductible, Medicare generally pays 80% and the beneficiary pays 20% coinsurance of the Medicare-approved amount — with no out-of-pocket cap.
- Most preventive services (annual wellness visit, many screenings) are covered at 100% with no coinsurance.
Trap: Part B excludes most routine dental, vision, hearing aids, and custodial/long-term care. These exclusions are exactly why beneficiaries add Part C or buy dental/vision riders.
Enrollment Periods and Late Penalties
Enrollment timing is heavily tested. The Initial Enrollment Period (IEP) is a 7-month window: the 3 months before the month you turn 65, the birthday month, and the 3 months after. The General Enrollment Period (GEP) runs January 1 - March 31 each year, with coverage starting the month after enrollment.
| Enrollment Period | Timing | Notes |
|---|---|---|
| Initial (IEP) | 7 months around 65th birthday | No penalty if enrolled here |
| General (GEP) | Jan 1 - Mar 31 annually | For those who missed IEP |
| Special (SEP) | Triggered by qualifying event | E.g., losing employer group coverage |
The Part B late enrollment penalty is 10% of the premium for each full 12-month period the person could have had Part B but did not, and the surcharge generally lasts for life. A Special Enrollment Period (SEP) lets people who kept creditable employer coverage (active employee, employer with 20+ employees) enroll later without penalty.
Worked penalty: Someone eligible at 65 who waits 36 months (3 full 12-month periods) without creditable coverage pays a 30% Part B premium surcharge for life.
A Medicare beneficiary is discharged from the hospital and remains out of any hospital or SNF for 60 consecutive days, then is readmitted. What is the cost-sharing result?
A person becomes eligible for Medicare at 65 but, lacking creditable coverage, delays Part B for 3 full 12-month periods. What is the resulting Part B late enrollment penalty?