Medicare Part A

Key facts

Also called

Hospital Insurance (HI)

Financed by

Mainly Medicare payroll taxes paid into the Hospital Insurance trust fund

Premium

None for most people with about 10 years of Medicare-covered work

Cost sharing unit

Per benefit period, not per calendar year

Hospital payment system

Inpatient Prospective Payment System (IPPS), using MS-DRGs

What is Medicare Part A?

Medicare Part A is one of the two parts of Original Medicare, alongside Part B. It pays for care delivered when a beneficiary is formally admitted to a facility, including acute care hospitals, critical access hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities and skilled nursing facilities. It also covers hospice care and some home health care.

Most people do not pay a premium for Part A because they or a spouse paid Medicare payroll taxes for at least 40 quarters, roughly 10 years. People without enough work history can buy Part A for a monthly premium.

How Part A coverage works

Part A cost sharing is organized around benefit periods rather than calendar years. A benefit period begins on the day of an inpatient admission and ends after the beneficiary has gone 60 days in a row without inpatient hospital or skilled nursing care.

• Inpatient hospital: one deductible per benefit period covers the first 60 days, with daily coinsurance for longer stays.
• Skilled nursing facility: covered after a qualifying inpatient stay of at least three consecutive days, with no coinsurance for the first 20 days and daily coinsurance for days 21 to 100.
• Hospice: covered for terminally ill patients who choose comfort care instead of curative treatment, with minimal cost sharing.
• Dollar amounts for the deductible and coinsurance are updated by CMS each year.

Why Part A matters

Part A spending flows mostly to hospitals and post-acute providers under prospective payment systems. Acute care hospitals receive a fixed amount per stay based on the Medicare Severity Diagnosis Related Group (MS-DRG), while skilled nursing facilities, inpatient rehabilitation facilities and hospices have their own payment systems.

For hospital analysts, Part A rules explain much of a facility's Medicare revenue, and the Medicare cost reports that Part A providers file are a primary public source on hospital finances, bed counts and patient days. For drug and device makers, a product used during an inpatient stay is normally bundled into the DRG payment unless it qualifies for a new technology add-on payment (NTAP), which shapes how hospitals evaluate expensive new therapies.

Common misconceptions about Part A

Being in a hospital bed does not mean Part A is paying. Patients kept under observation are outpatients, so their hospital services are billed under Part B, and observation days do not count toward the three-day stay needed for skilled nursing facility coverage. Hospitals must give the Medicare Outpatient Observation Notice (MOON) to patients who receive observation services for more than 24 hours.

Physician services delivered during an inpatient stay are also billed under Part B, even though the hospital stay itself falls under Part A.