13.1 Medicare Parts A, B, C, and D

Medicare Parts A, B, C, and D

Medicare is the federal health program created under Title XVIII of the Social Security Act in 1965. It is administered by the Centers for Medicare & Medicaid Services (CMS) and funded through payroll taxes, premiums, and general revenue. The exam expects you to know precisely who qualifies, what each of the four Parts pays, and where the gaps are. Eligibility is the foundation: a person qualifies at age 65 if they or a spouse have at least 40 quarters (10 years) of Medicare-covered employment.

People under 65 also qualify after receiving Social Security Disability Insurance (SSDI) for 24 months, or immediately upon diagnosis of End-Stage Renal Disease (ESRD) or ALS (Lou Gehrig's disease). Memorize the 24-month SSDI waiting period; the ALS and ESRD exceptions are favorite distractors.

Part A - Hospital Insurance

Part A covers inpatient hospital stays, skilled nursing facility (SNF) care, home health, and hospice. Most beneficiaries pay no premium because they earned 40 quarters. Part A uses a benefit period, which begins on admission and ends after 60 consecutive days out of a hospital or SNF.

Within each benefit period the beneficiary pays one inpatient deductible, then daily coinsurance after a threshold of days. SNF care is covered only after a qualifying 3-day inpatient hospital stay, for up to 100 days, and only when skilled care is medically required - not for custodial (long-term) care.

Part A cost-sharing structure (illustrative figures)

Worked example: A patient admitted for 65 days pays one Part A deductible plus 5 days of coinsurance (days 61-65). Lifetime reserve days are a one-time pool of 60 days used only beyond day 90; once spent, they never renew. A new benefit period - and a new deductible - begins only after 60 days fully out of inpatient/SNF care.

Part B - Medical Insurance

Part B is voluntary and requires a monthly premium (standard $174.70, higher for high earners under IRMAA). It covers physician services, outpatient care, lab tests, durable medical equipment, and preventive services. Part B has an annual deductible ($240) and then pays 80% of the Medicare-approved amount; the beneficiary pays the remaining 20% with no out-of-pocket maximum - a major coverage gap that Medigap exists to fill.

Part C - Medicare Advantage

Part C (Medicare Advantage) lets private insurers contract with CMS to deliver Part A and Part B benefits, usually bundling Part D drug coverage. Plans are HMO, PPO, PFFS, or Special Needs Plans (SNPs). They must cover everything Original Medicare covers and add an annual out-of-pocket maximum, which Original Medicare lacks. To enroll, a person must have both Part A and Part B and live in the plan's service area; ESRD enrollees can now join Advantage plans.

Part D - Prescription Drugs

Part D adds outpatient prescription drug coverage through private plans (stand-alone PDPs or built into Advantage). Standard design includes a deductible, an initial coverage phase, and catastrophic coverage. Late-enrollment penalties apply if a beneficiary goes 63+ continuous days without creditable coverage after eligibility - 1% of the national base premium per uncovered month, added permanently.

Common traps

• Part A is premium-free with 40 quarters; Part B always has a premium.
• SNF requires a prior 3-day inpatient stay and covers max 100 days.
• Original Medicare has NO out-of-pocket max; Part C does.
• Custodial/long-term care is never covered by Medicare.

Enrollment Periods and Late-Enrollment Penalties

Medicare timing is heavily tested. The Initial Enrollment Period (IEP) is the 7-month window around the 65th birthday month (3 before, the month of, 3 after). The General Enrollment Period runs Jan 1-Mar 31 for those who missed the IEP. Special Enrollment Periods apply to people who kept employer coverage past 65.

Part C and Part D Mechanics

Part C (Medicare Advantage) is sold by private insurers and bundles Parts A and B, usually adding Part D drug coverage and extras (dental, vision). It uses networks and often requires referrals. Part D drug plans use a tiered formulary.

Worked trap: a beneficiary who delayed Part B for two years without creditable employer coverage pays a 20% lifetime surcharge (10% x 2). Producers stress timely enrollment because the penalty never goes away. Note that a Medigap policy may not be paired with Medicare Advantage - Medigap supplements Original Medicare only.

What Part A and Part B Actually Cover

Part A (hospital insurance) covers inpatient hospital stays, skilled nursing facility care (short-term, after a qualifying hospital stay), home health, and hospice. It is premium-free for those with 40 work credits and uses a benefit-period deductible. Part B (medical insurance) covers outpatient care, physician services, durable medical equipment, and preventive services, with a monthly premium, an annual deductible, and 20% coinsurance.

Worked trap: Medicare does not cover long-term custodial care, routine dental, vision, or hearing - gaps filled by Medigap (cost-sharing), Part D (drugs), or separate policies. Skilled-nursing coverage under Part A is short-term and rehabilitative, requiring a prior qualifying inpatient stay; it is not the same as the custodial nursing-home care that Medicaid or LTC insurance must cover.