Understanding Medicare and Its Different Parts

Medicare and its different parts

Reason to Know Medicare and Its Different Parts

Providers are usually reimbursed by third-party payers to support the individuals the entity insures. Medical coders need to know which insurance plans accept which codes and which government and payer regulations they need to follow. 

The two main types of payers are commercial and government plans.  Commercial insurance plans, such as HMOs, are private.

Government insurance plans, such as Medicare and Medicaid, are public.

Medicare – Largest Third-Party Payer

Medicare is the largest third-party payer and is provided by the federal government. Medicare is broken down into different parts based on what each part covers. 

According to CMS.gov, Medicare is available to people:

  • 65 years of age or older
  • who are blind or disabled
  • with permanent kidney failure or end-stage renal disease (ESRD)

All persons covered under Medicare are called beneficiaries.

Image of text stating that medical coders need to follow instruction from third-party payers

Medicare – Parts A, B, C, and D

Medicare is broken down into 4 parts:

  • Part A – Hospital Insurance
  • Part B – Medical Insurance
  • Part C – Medicare Advantage
  • Part D – Prescription Drug Coverage

Original Medicare is made up of Parts A and B.

Medicare Part A Hospital Insurance

Part A (Hospital Insurance)

Part A services are reported by hospitals using diagnosis codes and procedure codes that together determine Medical Severity-Diagnosis Related Groups (MS-DRG) assignment, according to Carol J. Buck in Step-by-Step Medical Coding, 2018 Edition. 

Part A covers hospital care, skilled nursing facility care, some home health, and hospice services.

Beneficiaries who are eligible for Medicare benefits are automatically eligible for Part A hospital insurance.

Hospital Services

Hospital services (according to Medicare.gov) include:

  • Semi-private room
  • Meals
  • General nursing
  • Drugs while being treated in the hospital
  • Other hospital services and supplies

Inpatient care is received through:

  • Acute care hospitals
  • Critical access hospitals
  • Inpatient rehabilitation facilities
  • Long-term care hospitals
  • Mental health care
  • Participation in qualifying clinical research study

Not covered:

  • Private duty nurse
  • Private room unless medically necessary
  • Phone and television in the room, unless included in the room charges
  • Personal care items

Skilled nursing care

Skilled nursing care (according to Medicare.gov) includes:

  • Semi-private room
  • Meals
  • Skilled nursing care
  • Physical and occupational therapy, if necessary, to achieve the health goal
  • Speech pathology services, if necessary, to achieve the health goal
  • Medical social services
  • Medications
  • Medical supplies and equipment used in the facility
  • Ambulance transportation (when other transportation is a health issue) to the closest supplier of necessary services that are not available at the SNF
  • Dietary counseling

These conditions must be met:

  • Inpatient care in a skilled nursing facility, certified by Medicare, can be provided if the patient needs daily skilled nursing or rehabilitation services that cannot be provided in another setting
  • Skilled nursing care must be performed or supervised by a licensed nursing professional
  • Skilled rehabilitation services may include services such as physical therapy and must be performed or supervised by a professional therapist
  • Skilled nursing care and skilled rehabilitation services can only be provided according to a physician’s order

Not covered:

  • Any days spent in a hospital as an outpatient before being admitted as an inpatient by a physician

Home Health

Home health (according to Medicare.gov) must come from a participating home health agency and include the following:

  • Part-time skilled nursing care
  • Part-time home health aide care
  • Physical therapy
  • Occupational therapy
  • Speech therapy
  • Medical social services

The home health care agency typically coordinates the services based on the physician’s orders. Home health care services must be medically necessary in order to be covered.

Not covered:

  • 24-hour-a-day care at home
  • Meal delivery to the home
  • Homemaker services
  • Personal care

Hospice Care

Hospice care (according to Medicare.govis usually provided in the home, but it may also be covered in a hospice inpatient facility. The plan of care depends on the terminal illness and related conditions and may include any or all of the following services:

  • Physician services and nursing care
  • Medical equipment and supplies
  • Prescription drugs for control of symptoms and pain relief
  • Hospice aide and homemaker services
  • Physical, occupational, and speech pathology services
  • Social work services
  • Dietary counseling
  • Grief and loss counseling for patient and the family
  • Short-term inpatient care
  • Short-term respite care
  • Any other Medicare-covered services necessary to manage pain and other symptoms associated with the terminal illness and related conditions based on the hospice team’s recommendations

These conditions must be met:

  • Hospice physician and regular physician, if the patient has one, certifies that the patient is terminally ill and is expected to live 6 months or less
  • Patient accepts palliative care for comfort rather than care to cure the illness
  • Patient signs a form indicating the choice of hospice care rather than Medicare-covered treatments for the terminal illness and related conditions

Not covered:

  • Treatment for the purpose of curing the terminal illness and/or associated conditions
  • Prescription drugs to cure the illness
  • Care from a hospice provider that was not originally chosen
  • Room and board
  • Care provided as a hospital outpatient, such as in an emergency room, care as a hospital inpatient, or transportation by ambulance
Medicare Part B Medical Insurance

Part B (Medical Insurance)

Part B services are reported using diagnosis codes, CPT codes for the service or procedure, and HCPCS codes (Level II codes) for additional supplies and services.  

Beneficiaries are not automatically provided Part B coverage when they become eligible for Medicare. They have to purchase the benefits by paying a monthly premium.

Part B services (according to Medicare.gov)  include: 

  • Medically necessary services
    • Services or supplies necessary to diagnose or treat the medical condition and that meet accepted standards of medical practice
  • Preventive services
    • Health care to prevent illness or to identify it in its early stages, and when treatment is most likely to be effective

Items covered:

  • Clinical research
  • Ambulance services
  • Durable medical equipment (DME)
  • Mental health
  • Second option before surgery
  • Limited outpatient prescription drugs

Not covered:

  • Long-term care
  • Most dental care
  • Eye exams related to prescribing glasses
  • Dentures
  • Cosmetic surgery
  • Acupuncture
  • Hearing aids and exams for fitting them
  • Routine foot care
Medicare Part C Medicare Advantage

Part C (Medicare Advantage Plans)

Medicare Part C is otherwise known as Medicare Advantage (formerly Medicare+Choice).

According to Medicare.gov, Part C covers the following:

  • All the services that Original Medicare covers (Medicare Parts A and B)
  • Most include Part D, prescription drug coverage
  • Emergency and urgent care

Original Medicare still covers hospice care, some new Medicare benefits, and some costs related to clinical research studies.

Medicare approves private insurers to manage the plans, and Medicare beneficiaries have the option to choose a healthcare provider from the list.

Different Types of MA plans include:

  • Health Maintenance Organization (HMO)
  • Preferred Provider Organization (PPO)
  • Private Fee-for-Service Plan (PFFS)
  • Special Needs Plan (SNP)
  • Medical Savings Account Plan (MSA)
  • HMO Point of Service (HMO POS)

Most MA plans offer additional coverage for these services:

  • Vision
  • Hearing
  • Dental
  • Health and wellness programs

There is usually a monthly premium for the MA Plan. Copayments, coinsurance, and deductibles can vary based on the plan.

Medicare Part D Prescription Drugs

Part D (Prescription Drugs)

According to Medicare.gov, Part D covers prescription drug coverage.

All Medicare beneficiaries are able to enroll in Part D, prescription drug plan. Drug coverage is provided by private companies that have been approved by Medicare.

The cost for each plan and the drugs that are covered can vary.  


By understanding Medicare and its different parts, medical coders are better able to do their jobs and remain compliant in their coding.

medicare and its different parts

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