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) for people age 65 and older, certain younger people receiving Social Security Disability Insurance (SSDI), and individuals with End-Stage Renal Disease (ESRD) or ALS. Roughly 40 quarters (10 years) of Medicare-taxed employment earns premium-free Part A.

Medicare is organized into four parts. The exam consistently tests what each part covers, the cost-sharing structure, enrollment windows, and the lifetime late-enrollment penalties.

The Four Parts

Part A Cost-Sharing (Hospital Benefit Periods)

A benefit period begins on admission and ends after 60 consecutive days without inpatient or SNF care. A new deductible applies each new benefit period — there is no annual limit on the number of benefit periods.

Worked example: A patient is hospitalized 5 days in March, discharged, then readmitted 75 days later. Because more than 60 days elapsed, a new benefit period begins and a second $1,676 deductible applies.

SNF coverage requires a qualifying 3-day inpatient hospital stay first; days 1–20 are fully covered, days 21–100 carry coinsurance, and there is no coverage after day 100.

Part B Cost-Sharing and Enrollment

Part B charges a monthly premium ($185.00 standard in 2025), an annual deductible ($257 in 2025), and then 80/20 coinsurance — Medicare pays 80% of the approved amount, the beneficiary pays 20%. High earners pay an Income-Related Monthly Adjustment Amount (IRMAA).

Enrollment Periods

• Initial Enrollment Period (IEP): 7 months — 3 months before, the birthday month, and 3 months after turning 65.
• General Enrollment Period (GEP): Jan 1 – Mar 31; coverage starts the first of the month after enrollment.
• Special Enrollment Period (SEP): 8 months after losing active employer group coverage.

Late Enrollment Penalties (Lifetime)

Trap: COBRA and retiree coverage are NOT creditable for delaying Part B. Only coverage from current active employment qualifies a beneficiary for the penalty-free SEP.

Parts C and D

Part C (Medicare Advantage) plans are sold by private insurers approved by CMS. They must cover everything Original Medicare covers, typically use HMO/PPO networks, often add dental/vision/hearing, and must impose an annual out-of-pocket maximum — something Original Medicare lacks. A beneficiary in Advantage still pays the Part B premium plus any plan premium.

Because Advantage plans use networks, going out-of-network can mean higher costs or no coverage, and HMO-style plans usually require a primary-care referral to see specialists. This network trade-off is the practical reason some beneficiaries prefer Original Medicare plus a Medigap policy instead.

Part D provides outpatient drug coverage through standalone plans (PDPs) or bundled into Advantage plans (MA-PD). Beginning in 2025, the Inflation Reduction Act caps annual out-of-pocket drug spending at $2,000 and eliminates the old 'donut hole' coverage-gap structure. Low-income beneficiaries may qualify for the Extra Help (Low-Income Subsidy) program, which reduces or eliminates Part D premiums and cost-sharing.

The Annual Election Period (AEP) runs October 15 – December 7, when beneficiaries may switch between Original Medicare and Advantage and change Part D plans, effective January 1.

A separate Medicare Advantage Open Enrollment Period (January 1 – March 31) lets current Advantage members switch plans once or return to Original Medicare.

Worked Part A Benefit-Period Example

Medicare Part A uses benefit periods, not calendar years. A benefit period begins on hospital admission and ends after the patient has been out of a hospital or skilled facility for 60 consecutive days. For each benefit period the patient pays the Part A deductible; days 1-60 are then fully covered, days 61-90 carry a daily coinsurance, and days 91+ draw on 60 lifetime reserve days.

If a patient is hospitalized, discharged, and readmitted within 60 days, it is the same benefit period — no new deductible. If readmitted after 60 days out, a new benefit period starts and a new deductible applies. Because there is no annual limit on the number of benefit periods, a chronically ill patient can owe multiple deductibles in a year — a gap that Medigap is designed to fill, which is why the exam ties the two topics together.

Enrollment Periods and Late Penalties

Medicare enrollment timing is heavily tested. The Initial Enrollment Period (IEP) spans seven months around the 65th birthday. The General Enrollment Period (Jan 1-Mar 31) is for those who missed the IEP, with coverage delayed and late-enrollment penalties for Part B (a permanent 10% premium surcharge per 12 months of delay) and Part D.

Special Enrollment Periods (SEPs) waive penalties for those who delayed because they had qualifying employer group coverage. Part C (Medicare Advantage) and Part D have their own Annual Election Period (Oct 15-Dec 7). The exam expects you to know that delaying Part B without creditable employer coverage triggers a lifelong premium penalty — a frequent distractor versus the one-time costs of other programs.