What is Medicare?

What is Medicare?

Medicare is the name given to a federal health insurance program that was created by the US government in 1965. It was mainly created for people aged 65 and over though it was expanded in 1972 to include some people who were aged under 65 but who suffered from long-term disabilities.  

Today the Medicare program provides different levels of medical care for around 60 million people across the United States, meaning that they have access to ongoing health treatment and a feeling of better financial security. The program helps to pay for a variety of medical care services, including hospitalizations, physician visits, prescription drugs, preventive services, home health care and hospice care.

What are the parts of Medicare? 

Medicare is split into four distinct parts (A, B, C and D), People may be eligible for some parts but not others, but they are broken down as follows:

Part A covers inpatient hospital stays, skilled nursing facility (SNF) stays, home health visits, and hospice care. Part A benefits are subject to a deductible and require coinsurance for extended inpatient hospital and SNF stays.

Part B covers regular physician visits, outpatient services, preventive services, and some home health visits. Many Part B benefits are subject to a deductible and coinsurance of 20 percent. No coinsurance or deductible is charged for an annual wellness visit or for preventive services that are rated ‘A’ or ‘B’ by the U.S. Preventive Services Task Force (these might include a mammography or prostate cancer screenings). 

Part C refers to the Medicare Advantage program, through which people can enrol in a private health plan, such as a health maintenance organization (HMO) or preferred provider organization (PPO). These people also receive the Medicare-covered Part A and Part B benefits and typically the Part D benefits. 

Part D covers the outpatient prescription drugs that are prescribed through private plans that contract with Medicare, including stand-alone prescription drug plans (PDPs) and Medicare Advantage plans with prescription drug coverage (MA-PDs). Part D benefits help pay for drug costs - different plans are generally available depending on whether a potential customer is in need of regular, high-cost drugs, for example, or doesn’t require regular drugs or is just prescribed low-costa generic drugs. 

Who is eligible for Medicare? 

Most people ages 65 and over are entitled to Medicare Part A if they or their spouse are eligible for Social Security payments. People also do not have to pay a premium for Part A if they paid payroll taxes for 10 years or more. 

People under age 65, who receive Social Security Disability Insurance (SSDI) payments, generally become eligible for Medicare after a two-year waiting period, while some people diagnosed with chronic diseases become eligible for Medicare with no waiting period.

The benefit gap

Although Medicare provides protection against the costs of many health care services, traditional Medicare coverage does suffer from relatively high deductibles and cost-sharing requirements. It also places almost no limit on what can result in very high out-of-pocket spending for the people it aims to cover, especially for services covered under parts A and B. 

Traditional Medicare does not pay for some services that many older people count as essential including dental services, eyeglasses, and hearing aids. In light of these financial gaps in Medicare’s stated benefits, many people end up having to take out supplemental health insurance coverage to cover the gap between the benefits of Medicare and the realities of the cost of medical services. 

The future of Medicare

As the population steadily ages, the demands on Medicare become ever more critical, and the challenges of offering future generations financial security as they face increased medical care costs become ever harder. 

The main concerns are tied in with prescription drug charges, particularly as speciality drugs become more and more expensive. To maintain the effectiveness of Medicare, a number of policies are under consideration. Most of them centre around a restructuring of Medicare, raising the eligibility age and also allowing people under 65 to buy into the Medicare program. 

It remains to be seen how effective these measures would be, should they come to fruition, but for now, the system still offers some respite from an increasingly expensive medical care field. 

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Paul Oswell

Paul Oswell is a US-based freelance writer for the Guardian, Daily Telegraph, The Sunday Times and more. While working for Top Ten Reviews, Paul has written about a broad range of subjects, but many of these concern money and tax. You'll find his bylines on articles from tax software to payday loans to create your own Will software.