Medicare Parts A, B, C, and D

Medicare at a glance

Medicare is the federal health insurance program for people age 65 or older, people under 65 who have been entitled to Social Security or Railroad Retirement disability benefits for at least 24 months, and people of any age with end-stage renal disease (ESRD). It is divided into four parts, and the exam expects you to know what each part covers, who pays for it, and how the parts fit together.

The diagram is titled Two ways to get Medicare and shows two side-by-side panels. The left panel is Original Medicare, run by the government. It holds two boxes: Part A, covering hospital care, skilled nursing, home health and hospice; and Part B, covering doctors, outpatient care, medical equipment and preventive care. Below them, joined by a plus sign, is a dashed box for an optional stand-alone Part D drug plan. The right panel is Part C, Medicare Advantage, one private plan approved by the Centers for Medicare and Medicaid Services. It stacks three boxes: it covers everything in Parts A and B, and you must have A and B and live in the service area; it usually includes Part D drug coverage, called an MA-PD plan; and it may add extras and has an out-of-pocket maximum, with plan types such as HMO, PPO, special needs plans, private fee-for-service and medical savings accounts. — Original Medicare (Parts A and B, plus optional Part D) versus Medicare Advantage (Part C).

Part A: hospital insurance

Part A provides basic protection against the costs of inpatient hospital care, skilled nursing facility care after a qualifying hospital stay, home health services, and hospice care.

Most people pay no Part A premium, because they or a spouse paid Medicare payroll taxes for at least 40 quarters (10 years). Those without enough work history may buy Part A.
Cost sharing is built around the benefit period: a deductible per benefit period, then daily coinsurance for longer hospital stays (days 61 to 90), plus 60 lifetime reserve days.
Skilled nursing facility care requires a prior 3-day inpatient hospital stay and is limited to 100 days per benefit period; days 21 to 100 carry a daily coinsurance.
Part A does not pay for long-term custodial care.

Part B: medical insurance

Part B is a voluntary supplementary medical insurance program, financed by enrollee premiums together with federal government contributions.

It covers physician services, outpatient hospital care, durable medical equipment, lab tests, ambulance services, and preventive care, including a one-time Welcome to Medicare exam in the first 12 months of Part B and a yearly wellness visit after that.
The enrollee pays a monthly premium (higher-income enrollees pay more), an annual deductible, and then generally 20% coinsurance of the Medicare-approved amount. Medicare pays the other 80%.
A doctor who accepts assignment agrees to take the Medicare-approved amount as full payment.
Delaying Part B without other qualifying coverage triggers a lifetime late-enrollment penalty of 10% of the premium for each full 12-month period of delay.

Parts A and B together are called Original Medicare, the government-run fee-for-service program.

Part C: Medicare Advantage

Part C lets a beneficiary receive Medicare benefits through a private plan approved and regulated by the federal Centers for Medicare & Medicaid Services (CMS) instead of through Original Medicare.

To join, you must be entitled to Part A and enrolled in Part B, keep paying the Part B premium, and live in the plan's service area.
Plan types include coordinated care plans (HMOs, PPOs, provider-sponsored organizations and special needs plans), private fee-for-service plans, and medical savings account (MSA) plans.
An Advantage plan must cover everything Original Medicare covers, may add extras such as dental or vision, and must have an annual out-of-pocket maximum. Many include drug coverage; these are MA-PD plans.
Agents who sell Advantage plans must be licensed under state law, and plans may not use cash or gifts as enrollment inducements.
A Medicare supplement (Medigap) policy does not work with Medicare Advantage.

Part D: prescription drug coverage

Part D is outpatient prescription drug coverage, partially subsidized by the federal government and offered by private insurers.

You are eligible if you are entitled to Part A and/or enrolled in Part B. You must choose a plan, enroll, and pay a monthly premium.
You get it either through a stand-alone prescription drug plan (PDP) added to Original Medicare or through an MA-PD plan.
People with limited income and resources can apply for the Low Income Subsidy (Extra Help).
Enrolling after your initial enrollment period without creditable drug coverage triggers a permanent late-enrollment penalty.

Enrollment windows

Initial enrollment period: 7 months, beginning 3 months before the month you turn 65.
Annual open enrollment: October 15 to December 7, when you can switch between Original Medicare and Medicare Advantage and change Part D plans.

Exam tip: A = hospital, B = doctors and outpatient, C = private plan alternative to A and B, D = drugs.