Medicare Parts A, B, C and D Explained
The four parts of Medicare are not four versions of the same coverage — they are four different payment systems, each with its own claim form, its own destination and its own rules. This guide walks through what each part covers and where the claim actually goes, written for the people who bill it.
Most Medicare billing errors start with a simple confusion: the part of Medicare that covers a service decides which form you bill, where you send it, and who pays — and each part works differently. A biller who treats 'Medicare' as one payer will eventually send an institutional claim down the professional route, or bill the Medicare Administrative Contractor (MAC) for a patient whose benefits are actually run by a private plan. This guide breaks the four parts down from the provider's side of the desk.
Part A: hospital and institutional coverage
Part A is hospital insurance. It covers inpatient hospital stays, skilled nursing facility care after a qualifying hospital stay, hospice care, and some home health services. Most beneficiaries pay no premium for Part A because they or a spouse paid Medicare taxes while working, but that premium fact matters far less to a billing office than the claim route.
Part A services are billed on the institutional claim — the UB-04 (CMS-1450) on paper, or its electronic equivalent, the 837I. Those claims go to the MAC's institutional side and are processed through Medicare's shared system for facility claims (FISS). Payment follows institutional logic rather than a fee schedule: inpatient stays are typically grouped under the inpatient prospective payment system (DRGs), skilled nursing under its own per-diem model, and hospice under daily rates. Deductibles and benefit periods — not calendar years — govern how cost sharing is counted, which is why eligibility checks for Part A have to look at benefit-period history and remaining days, not just whether coverage is 'active'.
Part B: professional and outpatient coverage
Part B is medical insurance: physician and practitioner services, outpatient hospital services, durable medical equipment, laboratory work, imaging, preventive services and many drugs administered in the office or outpatient setting. Beneficiaries pay a monthly premium and an annual deductible, and Part B usually pays 80 percent of the approved amount after the deductible, with the patient or a secondary payer responsible for the remaining 20 percent.
Part B is billed on the professional claim — the CMS-1500 on paper or the 837P electronically — and goes to the MAC for the jurisdiction where the service was furnished. If you bill professional services, this is the route you live on most of the time, and our CMS-1500 form guide covers its 33 fields in detail. Two Part B mechanics drive a large share of revenue-cycle work: first, whether the provider is participating (accepting assignment on all claims, paid at the full fee schedule amount) or non-participating (lower fee schedule amounts, with limited ability to balance-bill on unassigned claims); second, the crossover — for patients who also have supplemental coverage, Medicare often forwards the claim to the secondary payer automatically once it has paid, but only when the supplemental plan participates in that crossover arrangement.
Part C: Medicare Advantage — a private plan runs the benefits
Part C, Medicare Advantage, is not a separate benefit bucket. It is a different administrator: a private insurer approved by Medicare delivers the beneficiary's Part A and Part B benefits (and usually Part D) through its own plan, with its own provider network, authorisation rules and payment rates. Roughly half of Medicare beneficiaries are now enrolled in a Medicare Advantage plan rather than original Medicare.
For billing, the consequences are absolute: claims for a Medicare Advantage patient go to the plan, not to the MAC. Sending them to Medicare produces a rejection or denial telling you the patient has other coverage of record. Advantage plans typically follow the same claim formats — CMS-1500 for professional services, UB-04 for institutional — but they apply their own contracts, prior authorisation requirements, timely filing limits and plan-specific edits, which are often stricter than original Medicare's. This is why intake verification matters so much: a patient who hands you a red, white and blue Medicare card may in fact be covered by an Advantage plan listed on a completely different card. A proper insurance eligibility verification checks not just whether Medicare coverage exists, but which delivery system the beneficiary is enrolled in and which payer must receive the claim.
Part D: prescription drug coverage
Part D covers outpatient prescription drugs through private drug plans. From a medical practice's billing desk, the key fact is that Part D is almost never practice-billed. Drugs dispensed by a pharmacy are adjudicated at the pharmacy's point of sale through the patient's drug plan — no CMS-1500, no UB-04. Practices encounter Part D mainly in three ways: when a patient's drug is denied at the pharmacy and the prescriber is asked for a coverage determination or prior authorisation; when a drug could fall under either Part B or Part D depending on how and where it is administered, a genuinely common dispute for infused, inhaled and self-administered medications; and when patients in the coverage gap face cost sharing that affects adherence. The exception worth remembering is the reverse of the usual rule: drugs that are administered incident to a physician's service, or that cannot be self-administered, are generally Part B drugs, and those the practice does buy, bill and get paid for — miscoding one side of that line is a recurring source of denials and refund demands.
Medigap and other supplemental coverage
Beneficiaries in original Medicare often carry a Medicare supplement (Medigap) policy that pays some or all of the Part A and Part B deductible and coinsurance. Medigap is always secondary: Medicare pays first, and the supplement pays after, frequently through the automatic crossover described above. Other secondary arrangements a biller will meet include retiree employer coverage, Medicaid for dual-eligible patients (where the claim crosses to the state after Medicare, and Medicare Advantage has its own dual-eligible special needs plans), and TRICARE for Life. The billing sequence — primary, then secondary, then patient — is where coordination-of-benefits errors breed, and COB mistakes sit near the top of the list of the common medical billing errors that stall practice cash flow.
Medicare at a glance: the four parts compared
| Part | What it covers | Claim form / route | Who pays |
|---|---|---|---|
| Part A | Inpatient hospital, skilled nursing facility, hospice, some home health | UB-04 (CMS-1450) / 837I to the MAC — institutional (FISS) | Medicare (federal programme), usually no premium |
| Part B | Physician and outpatient services, DME, labs, imaging, office-administered drugs | CMS-1500 / 837P to the MAC for the service jurisdiction | Medicare pays typically 80% after deductible; patient or secondary pays 20% |
| Part C (Medicare Advantage) | Delivers Part A and Part B benefits (usually Part D too) through a private plan | Same forms — CMS-1500 or UB-04 — but sent to the plan, not the MAC | The private Medicare Advantage plan, under its own contract with the provider |
| Part D | Outpatient prescription drugs | No practice claim — adjudicated at the pharmacy point of sale | The patient's private drug plan, with cost sharing by coverage phase |
What this means at the billing desk
Four habits prevent most part-related denials. First, verify the delivery system at intake, every time — original Medicare and Medicare Advantage are indistinguishable from the patient's age or card colour. Second, route institutional and professional claims separately and confirm each went to the right contractor or plan; a claim acknowledged by the wrong destination is not a claim in process. Third, treat authorisations as plan-specific: an Advantage plan's approval rules override whatever original Medicare would have required. Fourth, work COB deliberately — identify Medigap, Medicaid dual status and retiree coverage before the first claim, because every crossover that fails silently becomes an account receivable someone has to chase by hand. The four parts are complicated, but they are not arbitrary: once the claim's part, form and payer line up, most of the rest of Medicare billing is discipline and follow-through.
Frequently asked questions
How can we tell whether a patient has original Medicare or a Medicare Advantage plan?
Ask for every insurance card the patient carries, not just the red, white and blue Medicare card, and verify coverage before the visit. The eligibility response identifies Medicare Advantage enrolment and names the plan; many beneficiaries are enrolled in Advantage without realising the distinction matters. If a claim billed to the MAC comes back showing other coverage of record, the patient is almost certainly in a plan, and the claim must be re-routed to that plan within its filing limit.
Does the practice ever bill Part D directly?
Almost never. Part D drugs are dispensed by pharmacies and adjudicated at the point of sale through the patient's drug plan, so no practice claim is filed. The practice's involvement is indirect: responding to pharmacy rejections, supplying documentation or prior authorisation for coverage determinations, and correctly identifying drugs that belong under Part B instead — those administered incident to a physician's service or not usually self-administered — which the practice does bill.
What is the Medicare crossover, and does every secondary claim cross over automatically?
After Medicare pays a claim for a beneficiary who also has a Medigap policy or certain other supplemental coverage, Medicare's coordination-of-benefits contractor can forward the claim information directly to the secondary payer, so the provider does not have to file a separate secondary claim. It only works when the supplemental plan participates in the crossover arrangement and the beneficiary's records are matched correctly. When a crossover fails, the secondary balance sits unworked unless the billing team files the claim itself.