13.1 Medicare Parts A, B, C, and D

Medicare is the federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS). It is funded primarily through payroll (FICA) taxes and beneficiary premiums, and it is the single most heavily tested senior-market topic on the national Life & Health exam.

Who Qualifies for Medicare

Eligibility is not limited to age 65. Three pathways open the door:

Exam Trap: A disabled worker waits 24 months after SSDI cash benefits begin before Medicare starts — unless the diagnosis is ALS (immediate) or ESRD (special rules). Memorize the 24-month rule.

The Four Parts at a Glance

Part A — Hospital Insurance

Part A is premium-free if the beneficiary or spouse has 40 quarters (10 years) of Medicare-taxed work. It pays per benefit period, not per calendar year. A benefit period begins on admission and ends after 60 consecutive days out of a hospital or skilled nursing facility (SNF).

Worked Example: A beneficiary stays 70 inpatient days in one benefit period. Cost = $1,676 deductible + (10 days × $419) = $1,676 + $4,190 = $5,866.

Part B — Medical Insurance

Part B is voluntary and requires a monthly premium ($185 standard in 2025; higher for high earners under IRMAA). After the $257 annual deductible, Medicare pays 80% of the Medicare-approved amount and the beneficiary pays the remaining 20% coinsurance — with no annual out-of-pocket maximum. This open-ended 20% is the core reason Medigap exists.

Part C — Medicare Advantage

Part C plans are offered by private insurers approved by Medicare. They must cover everything Original Medicare (A + B) covers, usually bundle Part D, and often add dental/vision/hearing. Enrollees use the plan's network (HMO/PPO) and the plan sets its own copays, but federal law requires an annual out-of-pocket maximum — a key contrast with Original Medicare.

Part D — Prescription Drug Coverage

Part D is sold by private insurers. Beginning in 2025, the Inflation Reduction Act eliminated the coverage gap ("donut hole") and capped annual out-of-pocket drug spending at $2,000. A beneficiary who goes 63+ days without creditable drug coverage after eligibility faces a permanent late enrollment penalty.

Enrollment Periods

Timing questions are common. Match the window to the trigger.

Penalty Math: Part B late penalty = 10% for each full 12 months the person was eligible but did not enroll. Someone who waited 30 months (two full 12-month periods) pays a 20% higher Part B premium for life.

Employer Coverage and the SEP

A worker who keeps active employer group coverage past 65 can delay Part B without penalty and use the 8-month SEP after that coverage ends. COBRA and retiree coverage do NOT count as active employer coverage for SEP purposes — a classic distractor.

The Four Parts at a Glance

Eligibility and Enrollment Windows

Medicare begins at 65 (or earlier with 24 months of SSDI, or immediately for ESRD/ALS). The Initial Enrollment Period is a 7-month window — the 3 months before, the month of, and the 3 months after the 65th birthday. Missing it can trigger lifelong late-enrollment penalties for Parts B and D.

Worked Example: A worker turning 65 in June has an IEP from March through September. Enrolling in March-May means coverage starts the birthday month; enrolling later delays the start. Skipping Part B without other creditable coverage adds a permanent 10%-per-year penalty.

Exam Distinction: Part A is hospital, Part B is medical — the most-tested pairing. Original Medicare (A+B) has no annual out-of-pocket maximum, which is exactly the gap Medigap and Medicare Advantage are designed to fill. Skilled nursing under Part A is limited (e.g., 100 days per benefit period), not long-term custodial care.