16.2 Medicare Part C (Advantage) and Part D (Drug)

Part C: Medicare Advantage

Medicare Part C, marketed as Medicare Advantage (MA), lets a beneficiary receive Medicare benefits through a private insurance company approved by CMS instead of directly from the government. The plan is paid a fixed amount per enrollee by Medicare.

Eligibility and the "All-In-One" Rule

To join a Medicare Advantage plan, a person must already be enrolled in both Part A and Part B. The MA plan then delivers all Part A and Part B benefits, and most plans bundle Part D drug coverage (a MA-PD plan). Many add extras Original Medicare does not cover, such as routine dental, vision, hearing, and fitness benefits.

Trap: A person cannot have a Medicare Advantage plan and a Medicare Supplement (Medigap) policy at the same time. Medigap only works with Original Medicare. Selling Medigap to an MA enrollee is a prohibited practice.

Common MA Plan Types

Cost Protection

Unlike Original Medicare, every Medicare Advantage plan must include an annual out-of-pocket maximum for Part A and B services. Once the enrollee reaches that cap, the plan pays 100% of covered Part A/B costs for the rest of the year — a key advantage over the uncapped 20% coinsurance of Original Medicare.

Part D: Prescription Drug Coverage

Medicare Part D adds outpatient prescription drug coverage. It is voluntary and delivered only by private insurers, in two ways:

• A stand-alone Prescription Drug Plan (PDP) added to Original Medicare, or
• Built into a Medicare Advantage (MA-PD) plan.

Formularies and Tiers

Each Part D plan publishes a formulary — its list of covered drugs — organized into cost tiers (for example, preferred generic, generic, preferred brand, non-preferred, specialty). Lower tiers cost the enrollee less. A plan must cover at least two drugs in most therapeutic categories.

The Coverage Stages

Part D cost-sharing moves through stages each calendar year:

Note: Recent reform phased out the old "coverage gap" (donut hole) and added a hard annual out-of-pocket cap on covered drugs — once met, the enrollee pays nothing more for covered prescriptions that year.

The Part D Late-Enrollment Penalty

If a beneficiary goes 63 or more continuous days without Part D or other creditable drug coverage after their Initial Enrollment Period, a permanent monthly penalty is added: roughly 1% of the national base beneficiary premium per uncovered month, recalculated yearly and owed for as long as they have Part D.

Worked example

A retiree had no drug coverage for 20 full months after eligibility. Penalty ≈ 20 × 1% = 20% of the national base premium, added to her monthly Part D premium for life. If the base premium is $34, that is about 0.20 × $34 ≈ $6.80/month extra, rounded per CMS rules.

When to Enroll in C and D

Both Part C and Part D use the same key enrollment windows:

• Initial Enrollment Period (IEP): the 7-month window around the 65th-birthday month.
• Annual Election Period (AEP): October 15 – December 7 each year — join, switch, or drop MA and Part D plans for coverage starting January 1.
• Medicare Advantage Open Enrollment Period (MA OEP): January 1 – March 31 — those already in an MA plan may switch to another MA plan or return to Original Medicare (with a PDP).

Trap: The AEP (Oct 15 – Dec 7) is the main yearly window for Part D and Part C changes. Do not confuse it with the Part B General Enrollment Period (Jan 1 – Mar 31) or the MA OEP, which is only for people already in an Advantage plan.

Original Medicare vs. Medicare Advantage — Side by Side

Why it matters: A beneficiary essentially chooses one of two paths — Original Medicare (often paired with a Part D plan and a Medigap policy) or a Medicare Advantage plan. A producer who understands the trade-offs (network limits and a cap under MA versus provider freedom and uncapped 20% coinsurance under Original Medicare) can match a client to the right path and avoid the prohibited Medigap-plus-MA combination.

Enrollment periods that govern C and D

Medicare uses several enrollment windows the exam tests by name:

• Initial Enrollment Period (IEP): the 7-month window around the 65th birthday month.
• Annual Election Period (AEP): October 15 - December 7, when beneficiaries may join, switch, or drop Part C and Part D plans for the next year.
• Medicare Advantage Open Enrollment (MA-OEP): January 1 - March 31, when MA enrollees may switch MA plans or return to Original Medicare.
• Special Enrollment Periods (SEPs): triggered by events such as moving out of a plan's service area or losing employer coverage.

Creditable coverage and the late-enrollment penalty

If a beneficiary goes 63+ continuous days without creditable drug coverage after their IEP, a Part D late-enrollment penalty is added to the premium for life, calculated as 1% of the national base premium per month uncovered. Maintaining creditable employer or VA drug coverage avoids the penalty.