16.2 Medicare Part C (Advantage) and Part D (Drug)
Key Takeaways
- Part C (Medicare Advantage) is private-plan delivery of Medicare; enrollees must have both Part A and Part B and must include an out-of-pocket maximum.
- MA plan types include HMO, PPO, PFFS, and SNP; members still pay the Part B premium, and Medigap cannot be sold to MA enrollees.
- Part D adds voluntary outpatient drug coverage as a standalone PDP or bundled MA-PD, with formulary tiers and a late-enrollment penalty of ~1% per month without creditable coverage.
- The 2026 Part D benefit removed the donut hole and capped out-of-pocket drug spending at about $2,000, after which the member pays $0 for covered drugs.
- AEP runs Oct 15 - Dec 7; CMS marketing rules require a Scope of Appointment and ban unsolicited contact and cross-selling.
Medicare Part C (Advantage) and Part D (Drug)
Parts C and D are the private-plan layers of Medicare. Part C (Medicare Advantage, MA) lets private insurers deliver Medicare benefits, while Part D (Prescription Drug Coverage) adds the outpatient drug benefit that Original Medicare lacks. Both are sold by private carriers under CMS contracts, and both involve marketing rules producers must follow. Exam items focus on how Advantage differs from Original Medicare and how the Part D benefit phases and penalties work.
Part C — Medicare Advantage
To join a Medicare Advantage plan a person must be enrolled in both Part A and Part B and live in the plan's service area. MA plans must cover everything Original Medicare covers (except hospice, which Part A still pays) and usually bundle Part D drug coverage plus extras like dental, vision, or hearing.
Key distinction: Original Medicare lets you see any provider accepting Medicare, while MA plans typically use networks (HMO or PPO), referrals, and prior authorization. MA plans must include an annual out-of-pocket maximum — something Original Medicare lacks.
Common Part C plan types
| Plan type | How it works |
|---|---|
| HMO | Network providers + primary-care referrals; out-of-network not covered except emergencies |
| PPO | Network with out-of-network coverage at higher cost; usually no referrals |
| PFFS (Private Fee-for-Service) | Plan sets payment terms; providers choose whether to accept |
| SNP (Special Needs Plan) | Limited to specific groups (chronic illness, dual-eligible, institutionalized) |
A member still pays the Part B premium in addition to any MA plan premium. The MA plan replaces — it does not supplement — Original Medicare. A Medicare Supplement (Medigap) cannot be used with an Advantage plan; that pairing is illegal to sell.
Part D — Prescription Drug Coverage
Part D is voluntary outpatient drug coverage sold as a standalone Prescription Drug Plan (PDP) alongside Original Medicare, or built into a Medicare Advantage Prescription Drug (MA-PD) plan. Each plan publishes a formulary — its list of covered drugs grouped into cost tiers. Plans must cover at least two drugs per therapeutic class and certain protected classes in full.
Like Part B, Part D carries a late-enrollment penalty: roughly 1% of the national base beneficiary premium for each full month without creditable coverage, added for life.
Part D benefit phases
The 2026 standard benefit removed the old "donut hole" coverage gap and added a hard out-of-pocket cap (~$2,000). The phases are:
- Deductible phase — beneficiary pays 100% up to the annual deductible (~$590 max).
- Initial coverage phase — plan and member share costs (commonly ~25% member coinsurance).
- Catastrophic phase — once the member reaches the ~$2,000 annual out-of-pocket maximum, they pay $0 for covered Part D drugs the rest of the year.
Worked example: A member with $9,000 in covered drug spending hits the $2,000 out-of-pocket cap and then pays nothing further for covered drugs that calendar year.
Enrollment windows and marketing rules
- Annual Election Period (AEP): October 15 - December 7 — join, drop, or switch MA and Part D plans; changes take effect January 1.
- Medicare Advantage Open Enrollment Period (MA-OEP): January 1 - March 31 — MA enrollees may make one change.
Producers must follow CMS marketing rules: a documented Scope of Appointment (SOA) before any sales meeting, no unsolicited door-to-door or cold-call marketing, and no cross-selling non-health products during an MA/PDP appointment. Violations are heavily tested and enforced.
A client enrolled in a Medicare Advantage (Part C) plan asks an agent to also sell her a Medicare Supplement (Medigap) policy to cover her cost-sharing. What is the correct action?
Under the 2026 standard Part D benefit, what happens once a beneficiary reaches the annual out-of-pocket maximum (about $2,000)?
Eligibility, Penalties, and Marketing Guardrails
To elect Part C (Medicare Advantage), a beneficiary must already have both Part A and Part B and live in the plan's service area; the plan then delivers all Part A and B benefits (and usually Part D) through a private insurer, often with extras like dental or vision.
Part D carries a late-enrollment penalty: a beneficiary who goes 63+ continuous days without creditable drug coverage after first eligibility pays a permanent surcharge — roughly 1% of the national base premium per month without coverage — added for as long as they hold Part D.
| Window | Purpose |
|---|---|
| Initial Enrollment Period | 7 months around the 65th-birthday month |
| Annual Election Period (Oct 15–Dec 7) | Join/switch/drop Part C and Part D |
| Medicare Advantage Open Enrollment (Jan 1–Mar 31) | One switch back to Original Medicare or another MA plan |
Marketing guardrails (CMS): producers may not make unsolicited door-to-door or cold-call contact, may not cross-sell non-health products at a sales appointment, and must obtain a scope-of-appointment form 48 hours in advance limiting what products are discussed.
Trap: Part C requires Parts A and B first; it does not replace them but administers them privately. The Part D penalty is permanent and based on months without creditable coverage.