Medicare Parts A, B, C, and D

Medicare: Parts A, B, C, and D

Medicare is the federal health insurance program created by Title XVIII of the Social Security Act (42 U.S.C. ch. 7). Because it is a federal program, its benefit structure is the same in every state. Most people become entitled when they reach age 65 and are entitled to Social Security or Railroad Retirement benefits. The statute also extends Medicare to people who have received Social Security disability benefits for a required waiting period, and to people with end-stage renal disease who need dialysis or a kidney transplant.

The program is built in four lettered parts. Two of them are the original benefits; the other two are ways to receive or add to coverage.

Part A — Hospital Insurance

Part A is the hospital insurance benefit. It covers institutional and facility-based care: inpatient hospital stays, post-hospital care in a skilled nursing facility, home health services, and hospice care for the terminally ill. Part A is the part most people receive without paying a monthly premium, because entitlement is built on work in Medicare-taxed employment. People who do not qualify that way may be allowed to buy in by paying a premium.

Part B — Supplementary Medical Insurance

Part B is supplementary medical insurance, and it is voluntary. It covers physician services, outpatient hospital services, diagnostic and laboratory tests, durable medical equipment, and preventive services. Because it is voluntary, an eligible person enrolls during a designated enrollment period and pays a monthly premium; the statute also imposes a late-enrollment penalty structure to discourage waiting. Part B typically pays a share of the approved amount after an annual deductible, leaving the beneficiary responsible for coinsurance.

Parts A and B together are commonly called Original Medicare — the government pays providers directly on a fee-for-service basis.

Part C — Medicare Advantage

Part C is not a separate list of benefits. It is the Medicare Advantage program, under which private organizations contract with Medicare to deliver Part A and Part B benefits through a managed-care or other approved plan. To join, a beneficiary must be entitled to Part A and enrolled in Part B. The plan must furnish at least the benefits available under Original Medicare, and many plans add extra benefits or bundle in prescription drug coverage — those are called MA-PD plans. A person who joins Part C is still a Medicare beneficiary; the plan simply becomes the route through which the coverage is delivered.

Part D — Prescription Drug Coverage

Part D is the voluntary prescription drug benefit. It covers outpatient prescription drugs and is delivered only through private plans that contract with Medicare — either a standalone prescription drug plan added to Original Medicare, or the drug portion of a Medicare Advantage plan. Enrollment is elective, involves a premium, and, like Part B, is subject to enrollment periods and a penalty for enrolling late without other creditable coverage. Low-income beneficiaries may qualify for subsidies that reduce premiums and cost sharing.

A useful shorthand: A is for admissions, B is for the bills from doctors, C combines A and B through a private plan, and D is for drugs.