Medicare is a government run insurance program for elderly Americans age 65 and older. Medicare enables (and requires) workers to pay in advance for future medical needs. It was created in the 60’s by President Truman as a way to close the widening health insurance gap for the most vulnerable citizens. Seen by many as a compromise for national healthcare (a gradualist step in that direction), it nevertheless gained and has maintained popular support: there is no denying that older people are more likely to have significant medical needs that make commercial health insurance prohibitively expensive, coupled with reduced income-earning capabilities to pay for care or insurance individually. Medicare has also been broadened to cover some people under the age of 65, such as Americans eligible for Social Security benefits through disability, and some government jobs include Medicare insurance coverage as a worker’s retirement benefit.

Medicare part A
This is the original Medicare, a hospital insurance modeled after the original Blue Cross hospital plans. It covers inpatient care and hospitalization, including care at a skilled nursing facility and “some home health care and hospice care” (Social Security Administration).  This only applies to care officially labeled “inpatient,” meaning a doctor has formally admitted the patient into the hospital (Medicare.gov). Other hospital visits may be labeled outpatient and not covered.

Medicare Part B
Doctor visits and outpatient care are covered by Part B. These are defined as “medically necessary” services designed to detect and treat medical conditions, and include some preventative care (such as flu shots). Medical equipment, such as diabetic supplies, mobility aids, and oxygen tanks are also covered.

Medicare Part C
Medicare Advantage (Part C) plans are private health insurance plans that expand Medicare coverage. These plans offer benefits not covered in Parts A and B, “such as hearing, dental, [and] health and wellness programs” (Medicare.gov), while providing all the services guaranteed by A and B coverage, and usually Part D as well. These private Medicare Advantage plans are approved by Medicare and receive payments from Medicare, but also charge an additional out of pocket premium to enrollees depending on the plan and benefits.

Medicare Part D
Prescription drug coverage under Medicare is run by approved private insurers. Enrollees get Part D either directly or through a Medicare Advantage plan. Like commercial prescription drug plans, Medicare prescription drug plans include co-pays or coinsurance and out of pocket payments vary depending on the cost of prescriptions. Most plans currently have a “donut hole” – a gap in coverage when the benefit limit (yearly amount the insurer will pay) has been reached, before “catastrophic coverage” kicks in and brings costs back down. During the gap period, enrollees may pay a significantly higher percentage of the total drug costs for their prescriptions. Current healthcare legislation as already begun shrinking the donut hole and will eliminate it entirely by 2020.

Funding
Medicare is primarily tax-funded by the federal government as a branch of Social Security. Workers and their employers pay a portion of their payroll taxes (social security tax) into the Medicare Social Security fund. Like Social security, Medicare is an entitlement program, not welfare, so all Americans can receive Medicare when they reach eligibility. Medicare’s secondary funding source is through premiums paid by enrollees. Some services, such as Part A are “premium free” because it is pre-paid by payroll taxes, however, Parts B, C, and D all incorporate regular premiums for coverage. Medicare also has an element of means-testing, it looks at the enrollees income to determine premiums, so wealthier enrollees pay higher premiums. It is also possible for some people not formally eligible to buy into the program and pay premiums under certain conditions. Medicare premiums are typically automatically deducted from Social Security income; Advantage plans and Prescription plans (Parts C and D) may be automatically deducted or paid directly.

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About The Author: Rose Newport is Vice President of Insurance License Express, a division of Express Schools, LLC. Since 1996, Express Schools has offered online insurance licensing courses and online real estate courses, as well as online real estate exam prep and insurance license exam prep.