13.1 Medicare Parts A, B, C, and D

Medicare overview

Medicare is the federal health program created in 1965 under Title XVIII of the Social Security Act. It is administered by the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services, while the Social Security Administration (SSA) handles enrollment. The program is divided into four parts. Original Medicare is Part A (hospital) plus Part B (medical); Part C bundles those benefits through private plans; Part D adds prescription drug coverage.

Who is eligible

Most people qualify at age 65. You also qualify before 65 if you have received Social Security disability benefits for 24 months, or immediately for End-Stage Renal Disease (ESRD) or ALS (Lou Gehrig's disease). Eligibility is tied to work credits, not income or health, so Medicare cannot decline an applicant for medical reasons.

Part A — Hospital Insurance

Part A is premium-free for individuals (or spouses) with 40 quarters (10 years) of Medicare-covered employment. Those with fewer credits may buy in. Part A covers inpatient hospital care, skilled nursing facility (SNF) care, home health, and hospice.

The key tested mechanic is the benefit period: it begins on admission and ends after the patient has been out of a hospital or SNF for 60 consecutive days. There is no annual limit on benefit periods.

SNF rule trap: Part A pays SNF only after a qualifying 3-day inpatient hospital stay, covers days 1–20 in full, then charges coinsurance for days 21–100, and pays nothing after day 100.

Part B — Medical Insurance

Part B is voluntary and financed by a monthly premium plus general revenue. It covers physician services, outpatient care, durable medical equipment, lab tests, and most preventive services. After a small annual deductible (~$240), Medicare generally pays 80% of the approved amount and the beneficiary pays the remaining 20% coinsurance with no out-of-pocket maximum — the gap Medigap is designed to fill.

Late-enrollment penalty: failing to enroll when first eligible (and lacking creditable employer coverage) adds 10% to the Part B premium for each full 12-month period of delay, for life. High-income enrollees pay an IRMAA surcharge based on prior tax returns.

Worked Part A Cost-Sharing and Benefit Periods

Part A uses benefit periods, not calendar years. A benefit period starts on hospital admission and ends after the patient has been out of a hospital or skilled facility for 60 consecutive days; a new admission then starts a new benefit period with a new deductible.

Worked example: A beneficiary is hospitalized in March (pays one Part A deductible), discharged, then readmitted in November after more than 60 days out — a second benefit period and a second deductible apply. Within a benefit period, days 1–60 are covered after the deductible; days 61–90 carry a daily coinsurance; and lifetime reserve days (60 total) cover days 91+ at a higher coinsurance. Skilled nursing facility care is covered fully for the first 20 days, with coinsurance for days 21–100, and nothing after 100.

Part D, Enrollment, and the Late-Enrollment Penalty

Part D (prescription drugs) is delivered by private plans. The Initial Enrollment Period spans the 7 months around the 65th birthday. Beneficiaries who delay Part B or Part D without creditable coverage face a permanent late-enrollment penalty added to premiums. Part C (Medicare Advantage) bundles A, B, and usually D through a private plan and must cover at least what Original Medicare covers. Distinguishing Part A (hospital/inpatient) from Part B (physician/outpatient) and recognizing that Part C is a delivery vehicle, not new benefits, are core exam distinctions.

Part C — Medicare Advantage

Part C (Medicare Advantage) lets beneficiaries receive Parts A and B (and usually D) through CMS-approved private plans such as HMOs and PPOs. The insured must remain enrolled in Parts A and B and keep paying the Part B premium. Advantage plans often add dental, vision, and hearing, and unlike Original Medicare they include an annual out-of-pocket maximum. In exchange, enrollees typically use network providers and may need referrals.

Part D — Prescription Drug Coverage

Part D is delivered through private Prescription Drug Plans (PDPs) or built into Advantage plans. Each plan uses a formulary (tiered drug list). Like Part B, Part D carries a late-enrollment penalty of roughly 1% of the national base premium per month of delay without creditable coverage. Recent reforms eliminated the old 'donut hole' coinsurance and capped annual out-of-pocket drug spending.

Enrollment periods to memorize

• Initial Enrollment Period (IEP): 7 months — the month you turn 65 plus the 3 months before and after.
• General Enrollment Period (GEP): Jan 1 – Mar 31 each year (for those who missed IEP).
• Annual Election Period (AEP): Oct 15 – Dec 7, to change Part C/D plans.
• Medicare Advantage Open Enrollment: Jan 1 – Mar 31, to switch Advantage plans or return to Original Medicare.
• Special Enrollment Period (SEP): triggered by losing creditable employer coverage; no late penalty applies if you enroll within the SEP window.

Coverage gaps and tested distinctions

A recurring exam theme is what Original Medicare does not cover. It does not pay for custodial long-term care, most dental, vision, and hearing, routine eyeglasses, hearing aids, or care outside the United States (with narrow exceptions). These gaps are exactly why Medigap, Medicare Advantage extras, stand-alone dental/vision plans, and long-term-care insurance exist.

Original Medicare vs. Medicare Advantage

Another trap: a beneficiary may not hold both a Medigap policy and a Medicare Advantage plan. Producers also distinguish assignment — when a provider 'accepts assignment,' it agrees to the Medicare-approved amount as full payment, protecting the beneficiary from excess charges that only certain Medigap plans cover.