13.1 Medicare Parts A, B, C, and D

What Medicare Is

Medicare is the federal health program administered by the Centers for Medicare & Medicaid Services (CMS) for people age 65 and older, people of any age who have received Social Security Disability (SSDI) for 24 months, and people with End-Stage Renal Disease (ESRD) or ALS (Lou Gehrig's disease). ALS and ESRD waive the 24-month wait. Eligibility is the most heavily tested fact set in the senior-products domain, so memorize the three doorways: age 65, 24-month disability, and the two waived conditions.

Medicare is built in four parts. Part A (Hospital) and Part B (Medical) form Original Medicare. Part C (Medicare Advantage) is a private alternative that bundles A and B. Part D is prescription drug coverage.

Part A: Hospital Insurance

Part A is premium-free for anyone with 40 quarters (10 years) of Medicare-taxed work, or their spouse's record. It covers inpatient hospital, skilled nursing facility (SNF), home health, and hospice. Part A uses benefit periods, not a calendar year. A benefit period starts on admission and ends after the patient has been out of a hospital or SNF for 60 consecutive days.

Key worked numbers (memorize the structure, not the exact dollar amounts that change yearly):

Trap: Part A does not cover custodial (long-term) care. SNF coverage requires a qualifying 3-day prior inpatient hospital stay and is skilled, not custodial.

Part B: Medical Insurance

Part B is voluntary and requires a monthly premium (income-adjusted via IRMAA for high earners). It covers doctor visits, outpatient care, durable medical equipment, lab tests, and preventive services. After an annual deductible, Medicare pays 80% of the approved amount and the beneficiary pays the remaining 20% coinsurance with no out-of-pocket maximum — the gap that Medigap exists to fill.

Late-enrollment penalty trap: failing to enroll in Part B when first eligible (and lacking creditable group coverage) adds 10% of the premium for each full 12-month period of delay, for life.

The Initial Enrollment Period (IEP) is 7 months: the 3 months before the 65th-birthday month, the birthday month, and the 3 months after. The General Enrollment Period runs January 1 - March 31 annually.

Part C and Part D

Part C (Medicare Advantage) is offered by private insurers approved by CMS. Enrollees must already have Parts A and B, continue paying the Part B premium, and receive all A/B benefits (often plus extras like dental or vision) through an HMO or PPO network. Part C plans must include an annual out-of-pocket maximum — a key advantage over Original Medicare.

Part D covers prescription drugs through private plans. The classic tested feature is the coverage gap ("donut hole"): after the beneficiary and plan reach an initial coverage limit, the beneficiary historically paid a larger share until catastrophic coverage began. A Part D late-enrollment penalty (1% of the national base premium per uncovered month without creditable coverage) is permanent, mirroring Part B's logic.

Eligibility, Enrollment Windows, and Part A/B Cost Sharing

The exam expects precise eligibility and enrollment facts. Medicare eligibility begins at age 65, or earlier for those who have received Social Security Disability Insurance for 24 months or who have ALS or end-stage renal disease. The Initial Enrollment Period spans seven months, the three months before the 65th-birthday month, the birth month, and the three months after. Missing it without creditable coverage triggers the General Enrollment Period (January to March) and a permanent Part B late penalty of 10% for each full 12 months delayed.

Part A is premium-free for those with sufficient work credits; Part B carries a monthly premium with an income-related adjustment (IRMAA) for high earners.

The cost-sharing structure drives the Medigap need. Part A uses a benefit period with a one-time inpatient deductible, full coverage for days 1 to 60, daily coinsurance for days 61 to 90, and lifetime reserve days thereafter. Part B has an annual deductible and then pays 80% of approved charges, leaving the beneficiary responsible for the remaining 20% with no out-of-pocket cap, which is precisely the open-ended exposure Medigap exists to close.

Distinguish the four parts cleanly: Part A is hospital insurance, Part B is medical insurance, Part C (Medicare Advantage) bundles A and B and usually D through a private plan that often adds extras like dental or vision, and Part D is stand-alone prescription drug coverage. Work a coordination scenario: a beneficiary cannot hold both a Medigap policy and a Medicare Advantage plan at the same time, because Advantage replaces Original Medicare while Medigap supplements it, a contrast the exam tests directly.

Medicare Advantage Plan Types and the Donut Hole

Part C deserves a closer look because the exam tests its plan varieties and rules. Medicare Advantage plans come as HMOs, PPOs, private fee-for-service plans, and special-needs plans, and an enrollee must keep paying the Part B premium in addition to any plan premium. Advantage plans must cover at least everything Original Medicare covers and cap annual out-of-pocket spending, an advantage over Original Medicare's open-ended Part B coinsurance, but they restrict members to plan networks and rules, unlike Original Medicare plus Medigap.

Enrollment runs through the Initial, Annual, and Medicare Advantage open-enrollment windows, with marketing of these plans tightly regulated to prevent high-pressure or misleading sales to seniors. Part D rounds out drug coverage and is tested for its coverage-gap (donut hole) structure and its permanent late-enrollment penalty, calculated as roughly 1% of the national base premium for each month the beneficiary went without creditable drug coverage, mirroring the Part B penalty logic and reinforcing why timely enrollment matters.