13.1 Medicare Parts A, B, C, and D
Key Takeaways
- Medicare has four parts: A (hospital), B (medical), C (Medicare Advantage), D (drugs); eligibility is age/disability-based, not income-based.
- Part A is premium-free at 40 quarters and uses 60-day benefit periods; SNF needs a prior 3-day hospital stay and caps at 100 days.
- Part B pays 80% after the deductible with no out-of-pocket cap; late enrollment adds a permanent 10%-per-year penalty.
- Part C is private Medicare Advantage and cannot be combined with a Medigap policy; Part D drug penalties are permanent.
- Key periods: IEP (7 months around age 65), GEP (Jan 1-Mar 31), AEP (Oct 15-Dec 7).
Medicare is the federal health insurance program created in 1965 under Title XVIII of the Social Security Act. It is administered by the Centers for Medicare & Medicaid Services (CMS) and enrollment is handled by the Social Security Administration (SSA). Most candidates miss exam questions here by confusing the four parts, so master what each one covers and how it is funded.
Who Is Eligible
Eligibility is generally tied to age and work history, not income (that distinguishes Medicare from Medicaid).
- Age 65 or older who are U.S. citizens or legal residents (5+ years).
- Under 65 receiving Social Security Disability Insurance (SSDI) for 24 months.
- Any age with End-Stage Renal Disease (ESRD) or ALS (Lou Gehrig's disease — coverage begins immediately).
The Four Parts at a Glance
| Part | Common Name | Covers | Premium Reality |
|---|---|---|---|
| A | Hospital Insurance | Inpatient hospital, SNF, hospice, some home health | Premium-free for most (paid 40+ quarters of FICA tax) |
| B | Medical Insurance | Doctor visits, outpatient, durable medical equipment, preventive | Monthly premium + annual deductible |
| C | Medicare Advantage | A + B (often D) through private plans | Varies by plan |
| D | Prescription Drug | Outpatient prescription drugs | Monthly premium via private plans |
Part A — Hospital Insurance
Part A is funded by payroll (FICA) taxes. A worker earns 4 quarters of coverage per year and needs 40 quarters (10 years) to qualify for premium-free Part A. Part A uses a benefit period framework, 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.
Part A Cost-Sharing (illustrative figures — verify current amounts)
| Service | Cost-Sharing |
|---|---|
| Days 1-60 (inpatient) | Pay the Part A deductible (~$1,632), then $0 |
| Days 61-90 | Daily coinsurance |
| Days 91-150 | Lifetime reserve days (60 total, non-renewable) |
| Beyond 150 | Patient pays all costs |
| SNF days 1-20 | $0 (must follow a 3-day hospital stay) |
| SNF days 21-100 | Daily coinsurance |
Trap: SNF coverage requires a qualifying 3-day inpatient hospital stay first, and Medicare never pays SNF beyond 100 days per benefit period. Custodial (long-term) care is NOT covered.
Part B — Medical Insurance
Part B is voluntary and funded by enrollee premiums plus general federal revenue. After the annual deductible, Medicare typically pays 80% of the approved amount and the beneficiary pays the remaining 20% coinsurance with no out-of-pocket maximum — which is why Medigap exists. High-income enrollees pay an IRMAA surcharge based on modified adjusted gross income.
Enrollment Periods (heavily tested)
- Initial Enrollment Period (IEP): 7 months — the 3 months before, the month of, and the 3 months after the 65th birthday.
- General Enrollment Period (GEP): January 1 - March 31 each year for those who missed IEP.
- Special Enrollment Period (SEP): for those who delayed Part B because they had creditable employer coverage; no late penalty.
- Annual Election Period (AEP): October 15 - December 7 to change Part C/D.
Late-Enrollment Penalties
| Part | Penalty |
|---|---|
| Part B | Premium rises 10% for each full 12-month period eligible but not enrolled — and lasts as long as you have Part B |
| Part D | 1% of the national base premium per month without creditable drug coverage — permanent |
Part C — Medicare Advantage
Part C is offered by private insurers that contract with CMS. A plan must cover everything Original Medicare (A + B) covers, often bundles Part D, and may add dental/vision. Enrollees must keep paying their Part B premium. Plans are typically HMO or PPO networks. Trap: you cannot have a Medigap policy and a Medicare Advantage plan at the same time.
Part D — Prescription Drugs
Part D is delivered through private stand-alone PDPs or built into MA plans. The historic coverage gap (donut hole) has been restructured, but exam items still reference the standard stages: deductible, initial coverage, coverage gap, and catastrophic. Enrollment requires Part A or B.
Original Medicare vs. Medicare Advantage
A client choosing how to receive Medicare faces two paths, and the agent must explain the trade-offs clearly. Original Medicare (A + B) lets the beneficiary see any provider that accepts Medicare nationwide, but leaves the 20% coinsurance exposure, so most pair it with a Medigap policy and a stand-alone Part D plan. Medicare Advantage (Part C) bundles benefits, often adds extras like dental and vision, and caps out-of-pocket spending, but restricts the client to a network and may require referrals and prior authorization.
Creditable Coverage and Avoiding Penalties
A recurring exam theme is creditable coverage. If a beneficiary keeps qualifying employer group coverage past 65, they may delay Part B and Part D enrollment without penalty and use a Special Enrollment Period when that coverage ends.
The agent's job is to confirm whether existing coverage is creditable before recommending the client drop or delay any Medicare part, because an avoidable lifetime penalty is a classic source of complaints and E&O exposure.
A 67-year-old is admitted to a skilled nursing facility directly from home (no prior hospitalization). How much will Medicare Part A pay for the SNF stay?
Which Medicare part is typically premium-free for individuals who paid FICA taxes for at least 40 quarters?