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). Eligibility begins at age 65 for individuals entitled to Social Security or Railroad Retirement benefits. Coverage also extends to anyone who has received Social Security Disability Insurance (SSDI) for 24 months, to individuals with end-stage renal disease (ESRD), and to those with amyotrophic lateral sclerosis (ALS, or Lou Gehrig's disease) with no waiting period.

Medicare is organized into four parts. Parts A and B together are called "Original Medicare." Part C and Part D are delivered through private insurers approved by CMS.

The Four Parts of Medicare

Part A: Hospital Insurance

Most people receive Part A premium-free if they or a spouse paid Medicare taxes for at least 40 quarters (10 years of work). Part A uses a benefit period, which begins on admission and ends after 60 consecutive days with no inpatient care.

• Inpatient deductible applies per benefit period (not per year), so a person could pay multiple deductibles in one year.
• Days 1-60: covered after deductible. Days 61-90: daily coinsurance. Days 91+: 60 lifetime reserve days at a higher coinsurance, used only once.
• Skilled nursing facility (SNF): requires a qualifying 3-day inpatient hospital stay; days 1-20 fully covered, days 21-100 require coinsurance, no coverage after 100 days.

Part A does not cover long-term custodial care, which is the most-tested trap.

Part B: Medical Insurance

Part B is voluntary and requires a monthly premium. After meeting a modest annual deductible, Medicare generally pays 80% of the approved amount and the beneficiary pays the remaining 20% coinsurance with no out-of-pocket maximum. Higher-income beneficiaries pay an Income-Related Monthly Adjustment Amount (IRMAA).

Worked example: A beneficiary incurs $3,000 in Part-B-approved outpatient charges after meeting the deductible. Medicare pays 80% = $2,400, and the beneficiary owes 20% = $600. Because Part B has no coinsurance cap, this 20% exposure is exactly what Medicare Supplement (Medigap) plans are designed to fill.

Part C: Medicare Advantage

Part C plans are sold by private insurers (HMO, PPO, PFFS) and must cover everything Original Medicare covers, often adding dental, vision, and Part D. Enrollees still pay the Part B premium plus any plan premium.

Part D: Prescription Drugs

Part D is voluntary outpatient drug coverage through private plans. A late enrollee without creditable drug coverage pays a permanent penalty calculated as roughly 1% of the national base premium for each month the person went without coverage.

Enrollment Periods and the Part B Late Penalty

Understanding enrollment windows is heavily tested. The Initial Enrollment Period (IEP) spans 7 months: the 3 months before the month a person turns 65, the birthday month, and the 3 months after. Those who miss the IEP and lack other creditable coverage must wait for the General Enrollment Period (GEP), January 1 through March 31 each year, with coverage beginning the following July 1.

The Part B late-enrollment penalty is the most-tested numeric trap. It adds 10% to the Part B premium for each full 12-month period the person could have had Part B but did not, and it lasts for as long as the person has Part B — it is not a one-time charge.

Worked example: A person delays Part B for 36 months (3 full 12-month periods) without creditable employer coverage. The penalty = 3 x 10% = 30% added to the standard Part B premium for life.

Coordination With Employer Coverage

A person still working at 65 with creditable group coverage may delay Part B without penalty and enroll later during an 8-month Special Enrollment Period (SEP) that begins when the employment or group coverage ends. This is why agents must verify whether a senior client has active employer coverage before recommending immediate Part B enrollment.

Original Medicare vs. Medicare Advantage

With Original Medicare (A + B), the beneficiary may see any provider that accepts Medicare and typically adds a standalone Part D plan and a Medigap policy. With Medicare Advantage (Part C), the beneficiary trades broad provider access for a network (HMO/PPO), an annual out-of-pocket maximum that Original Medicare lacks, and often $0 supplemental premiums — but cannot also own a Medigap policy. Beneficiaries may switch during the Annual Election Period (October 15 - December 7).