13.1 Medicare Parts A, B, C, and D

What Medicare Is

Medicare is the federal health program administered by the Centers for Medicare & Medicaid Services (CMS) for people age 65 and older, for individuals under 65 who have received Social Security Disability Insurance (SSDI) for 24 months, and for people with End-Stage Renal Disease (ESRD) or Amyotrophic Lateral Sclerosis (ALS). Eligibility is tied to Social Security work credits, not income. Original Medicare is the combination of Part A and Part B.

Medicare is not a poverty program (that is Medicaid). Exam questions test the four parts, the dollar cost-sharing structure, and the enrollment windows. Memorize the function of each part first, then layer on the numbers.

Part A — Hospital Insurance

Part A covers inpatient care: hospital stays, skilled nursing facility (SNF) care after a qualifying hospital stay, hospice, and some home health. Most people pay no premium for Part A because they (or a spouse) earned 40 quarters (10 years) of Medicare-taxed work.

Part A uses a benefit period, which begins on admission and ends after 60 consecutive days out of a hospital/SNF. There is no limit on the number of benefit periods. Cost-sharing (2026 figures vary annually; learn the structure):

Trap: SNF coverage requires a prior 3-day inpatient hospital stay and skilled (not custodial) care. Custodial/long-term nursing care is NOT a Medicare benefit.

Part B — Medical Insurance

Part B is voluntary and covers outpatient/physician services: doctor visits, lab tests, durable medical equipment (DME), preventive services, and outpatient surgery. It requires a monthly premium (income-adjusted via IRMAA for higher earners), an annual deductible, and then Medicare pays 80% of the approved amount while the beneficiary pays 20% coinsurance with no out-of-pocket maximum.

Late-enrollment penalty: if you do not enroll when first eligible and lack creditable employer coverage, the Part B premium increases 10% for each full 12-month period you delayed — and the penalty lasts for life.

Part C — Medicare Advantage

Part C, Medicare Advantage (MA), lets beneficiaries receive Parts A and B (and usually D) through a private insurer approved by CMS, typically an HMO or PPO. Plans must cover everything Original Medicare covers and often add dental, vision, and hearing. They use provider networks and have an annual out-of-pocket maximum — a key advantage over Original Medicare, which has none.

To enroll you must already have Parts A and B and live in the plan's service area. You cannot have both a Medicare Advantage plan and a Medigap policy at the same time.

Part D — Prescription Drug Coverage

Part D is voluntary outpatient prescription drug coverage sold by private insurers. Each plan uses a formulary (tiered drug list) and charges a monthly premium plus cost-sharing.

Late-enrollment penalty: delaying Part D without creditable drug coverage adds roughly 1% of the national base premium per month of delay, for life. Beginning in 2025, the law replaced the old 'donut hole' with a hard annual out-of-pocket cap on covered Part D drugs.

Enrollment windows

• Initial Enrollment Period (IEP): 7 months — the 3 months before, the month of, and 3 months after the 65th birthday.
• General Enrollment Period (GEP): Jan 1–Mar 31 each year (for those who missed IEP).
• Annual Election Period (AEP): Oct 15–Dec 7 — change Part C/D for the next year.
• Special Enrollment Period (SEP): triggered by qualifying events such as loss of employer coverage.

Comparing Original Medicare to Medicare Advantage

Clients constantly ask agents to choose between Original Medicare + Medigap + a standalone Part D versus a single Medicare Advantage (MA-PD) plan. The trade-offs are heavily tested:

• Original Medicare + Medigap: see any provider that accepts Medicare nationwide, no referrals, predictable cost-sharing once a Medigap plan is added — but two or three premiums (Part B, Medigap, Part D).
• Medicare Advantage: lower or $0 plan premium and an out-of-pocket maximum, often with dental/vision/hearing extras — but network restrictions, referrals, and prior authorization.

A beneficiary may switch from MA back to Original Medicare during the Annual Election Period or the Medicare Advantage Open Enrollment Period (Jan 1–Mar 31), but a later Medigap purchase may then be subject to underwriting if the one-time guaranteed-issue window has closed.

Premiums, IRMAA, and Coordination of Benefits

Higher-income beneficiaries pay an Income-Related Monthly Adjustment Amount (IRMAA) that increases both the Part B and the Part D premiums. IRMAA is determined from the modified adjusted gross income reported two years earlier, so a one-time income spike (e.g., a property sale) can raise premiums for a year.

Coordination of benefits (COB) determines who pays first when a beneficiary has other coverage. For an actively working person age 65+ at an employer with 20 or more employees, the group health plan pays primary and Medicare pays secondary. At smaller employers (fewer than 20), Medicare is primary. Workers' compensation, the VA, and liability insurance also affect which payer is primary, a point agents must explain accurately to avoid coverage gaps.