What Is Medicare?
Medicare is a U.S. government health insurance program. The plan covers people age 65 or older, younger ones with disabilities, and patients with end-stage renal disease.
Medicare is made up of several plans covering particular aspects of health care, and some come at a cost for the insured. While this allows the program to offer participants more choices in terms of costs and coverage, it also introduces complexity for those seeking to sign up.
- Medicare is a national program that subsidizes healthcare services for anyone age 65 or older, younger people with disabilities, and patients with end-stage renal disease.
- Medicare is divided into four components: Medicare Part A, Part B, Part C (also called Medicare Advantage), and Part D for prescription drugs.
- Medicare Part A premiums are free for those who made Medicare contributions through payroll taxes for at least 10 years.
- Patients are responsible for paying premiums for other parts of the Medicare program.
When Am I Eligible For Medicare?
How Medicare Works
Medicare is a national health insurance program funded by the U.S. government. Congress created the program by amending the Social Security Act in 1965 to provide coverage for people age 65 and older without health insurance.
The program is now administered by the Centers for Medicare and Medicaid Services (CMS) and extends coverage to people younger than 65 with certain disabilities and those who have end-stage renal disease or amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s disease. Medicare is made up of four components, each covering a different aspect of healthcare:
- Medicare Part A is hospital insurance also covering skilled nursing facility, hospice, and in-home care.
- Medicare Part B covers doctor's visits, outpatient care, home health care, durable medical equipment. and preventive screenings.
- Medicare Part C, also known as Medicare Advantage, describes Medicare-approved plans by private companies providing Medicare Part A, Part B, and usually Part D benefits.
- Medicare Part D covers prescription drugs.
Who Qualifies for Medicare?
Eligibility depends on a number of criteria, but in general, anyone who has lived in the United States legally for at least five years and is age 65 or older qualifies for Medicare coverage. Enrollment in Parts A and B is automatic for anyone who receives Social Security benefits. Part D coverage is optional, so you have to enroll to receive the coverage.
People under age 65 may qualify if they receive Social Security Disability Insurance (SSDI). Those who receive SSDI generally need to wait 24 months after they receive their first check before they become eligible for Medicare, although the program waives this requirement for anyone with ALS and or with permanent kidney failure. Enrollment can be done through the Social Security Administration (SSA) website.
Anyone with ALS automatically qualifies for Medicare, regardless of age.
Premiums for Medicare Part A, which covers hospital stays and other inpatient care, are free if the insured person or their spouse contributed to Medicare for 10 or more years through their payroll taxes. You are responsible for paying premiums for other parts of the Medicare program.
The program is primarily funded by payroll taxes under the Federal Insurance Contributions Act (FICA). As of 2022, FICA payroll taxes payed by employees include a 6.2% Social Security tax on annual earnings below $147,000 ($160,200 in 2023) and a 1.45% Medicare tax on all taxable earnings. Employers pay the same percentage on behalf of each employee. An additional Medicare surtax of 0.9% applies to annual earnings above $200,000 for single taxpayers and $250,000 for married couples filing jointly.
How Do I Enroll in Medicare?
As long as you are eligible to receive Social Security benefits when you turn 65, you will automatically be enrolled in Medicare Part A, which covers hospital costs, and Medicare Part B, which covers your visits to the doctor. You don’t need to do anything to enroll in these programs.
However, you will have to enroll for other parts of the Medicare program.
If you want Medicare Part D prescription drug coverage, you’ll need to enroll yourself. If you’re not receiving Social Security benefits, you can sign up for this through the SSA website. You should do this in a seven-month window around your 65th birthday. This window includes the three months before the month when you turn 65, your birthday month, and the three months after your birthday month. If you miss this period, you may incur a penalty.
If you want Medicare Supplement Insurance (Medigap), you also need to enroll yourself. The six-month open enrollment period for this starts the first month you are enrolled in Medicare Part B after age 65. The private insurers that provide Medigap plans are required to offer you coverage if you sign up during this period. Otherwise, there is no guarantee that they will sell you a Medigap plan.
If you miss your initial enrollment period or want to switch plans later, there are several annual Medicare open enrollment periods.
What Does Medicare Pay for?
As mentioned above, there are four different types of Medicare programs available to individuals. Basic Medicare coverage comes predominantly via Parts A and B or through the Medicare Part C plan. Individuals also may opt to enroll in the Medicare Part D plan.
Medicare Parts A and B are colloquially known as “Original Medicare,” since they date from the beginning of the program in 1965.
What Does Medicare Part A Cover?
Medicare Part A covers the cost of hospitals, skilled nursing facilities, hospices, and some home-based healthcare. However, this plan doesn’t cover long-term or custodial care. Coverage is automatic for anyone who receives Social Security benefits. For those who don’t receive benefits, enrollment can be done through the SSA website.
Deductibles and copayments for Part A are as follows:
|Part A Deductible and Copayment Amounts for Calendar Years 2022 and 2023|
|Inpatient hospital deductible||$1,556||$1,600|
|Daily copayment for 61st–90th Day||$389||$400|
|Daily copayment for lifetime reserve days||$778||$800|
|Skilled nursing facility copayment||$194.50||$200|
What Does Medicare Part B Cover?
Medicare Part B generally covers costs for outpatient care such as doctor visits. Part B also covers preventive services, ambulance transport, certain medical equipment, and mental health care. Some prescription drugs also qualify under this plan.
The standard monthly premium for Medicare Part B enrollees is $164.90 for 2023, down from $170.10 in 2022. The annual deductible is $226 for 2023, a decline from $233 in 2022.
However, premiums are higher for taxpayers with modified adjusted gross income (MAGI) above limits adjusted annually. For 2023, these were set at $97,000 in 2021 MAGI for single taxpayers and $194,000 for married couples filing jointly. That's up from $91,000 and $182,000, respectively, in 2022 based on 2020 MAGI.
What Is Medicare Part C?
Individuals who are eligible for Medicare Parts A and B are likewise eligible for Part C, also known as Medicare Advantage. Consumers purchase Medicare Advantage plans from private insurers rather than Medicare. These plans must offer coverage that is at least equivalent to Original Medicare (Parts A and B).
Many Medicare Advantage plans offer annual caps on out-of-pocket costs. Many also provide benefits that Original Medicare patients otherwise would need to purchase via supplemental insurance such as a Medigap plan, such as copayments, deductibles, and even coverage for travel outside the U.S. Some plans may also include dental, vision, and hearing care. Note that hearing aids are not covered by basic Medicare, although some Medicare Advantage plans do cover hearing services as supplemental benefits.
What Is Medicare Part D?
Medicare offers supplemental prescription drug coverage through Medicare Part D. Enrollees in Medicare Part A or Part B may enroll in Part D to receive subsidies for prescription drug costs that Original Medicare plans do not cover.
The History of the Medicare Program
On July 30, 1965, then-President Lyndon B. Johnson signed the bill authorizing Medicare and Medicaid. The Original Medicare program included what is now referred to as Part A (Hospital Insurance) and Part B (Medical Insurance).
In the intervening years, Congress has made many changes to Medicare. In general, the program has been expanded by making more people eligible for coverage, and extended to cover more medical conditions.
For example, in 1972, Medicare was expanded to cover the disabled, people with end-stage renal disease requiring dialysis or kidney transplant, and people age 65 or older who select Medicare coverage. Congress has since added new benefits like prescription drug coverage.
The Medicare Prescription Drug Improvement and Modernization Act (MMA) of 2003 made the biggest changes to Medicare in 38 years. Under the new legislation, private health plans approved by Medicare became known as Medicare Advantage Plans. These plans are sometimes called Part C or “MA Plans.” The MMA also expanded Medicare to include an optional prescription drug benefit, Part D, which went into effect in 2006.
The CARES Act of 2020
In response to the COVID-19 pandemic, then-President Donald Trump signed a $2 trillion package of relief measures, called the Coronavirus Aid, Relief, and Economic Security (CARES) Act, into law on March 27, 2020. It expanded Medicare coverage for the treatment of COVID-19. The CARES Act also:
- Improved Medicare coverage for telehealth services
- Authorized Medicare certification for home health services by physician assistants, nurse practitioners, and certified nurse specialists
- Increased Medicare payments for COVID-19-related hospital stays and durable medical equipment.
For Medicaid, the Families First Coronavirus Response Act (FFCRA) clarified that non-expansion states can use the Medicaid program to cover COVID-19–related services for uninsured adults who would have qualified for Medicaid if the state had chosen to expand. Other populations with limited Medicaid coverage are also eligible for coverage under this state option.
Medicare vs. Medicaid
Both Medicare and Medicaid are government-sponsored health insurance programs, but there are different eligibility requirements for each program. While Medicare is meant for those ages 65 and older and younger people with certain health conditions, Medicaid is a joint federal and state program that provides healthcare coverage to people with low incomes. To qualify for Medicaid, recipients are required by their state to have a limited amount of liquid assets.
Anyone with Medicaid coverage is eligible to receive services such as doctor and nursing care, X-rays, hospitalization, home health care, and lab and X-ray services. Some states may offer expanded coverage for prescriptions, physical therapy, dental services, and medical transportation.
Who Is Eligible for Medicare?
If you are 65 years old and eligible for Social Security, then Medicare is an option for you. If you’ve received Social Security Disability Insurance (SSDI) for 24 months, Medicare also becomes available, regardless of age. Individuals who have certain disabilities, such as amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease) or permanent kidney failure, are automatically eligible.
Is Medicare Free?
For most individuals, Medicare Part A premiums are free based on past payroll tax payments under the Federal Insurance Contributions Act (FICA). Individuals can also qualify for free Medicare Part A based on the work history of a spouse. Those who do not qualify have to pay a premium for Medicare Part A. Other Medicare components require a premium payment.
Is Medicare Insurance?
Medicare covers healthcare costs for eligible individuals in the same way that health insurance does. There is no premium for the basic part of Medicare, but coverage is more limited than private health insurance. Private health insurance often allows you to extend coverage to dependents, such as a spouse and children. Medicare participants, on the other hand, must qualify based on their age or disability.
What Is Not Covered by Medicare?
Medicare doesn't cover the cost of some important health care services. Most crucially, it doesn't pay for long-term care, also known as custodial care. Medicaid, the federal health program for those with low incomes, pays these custodial costs, but Medicare does not.
Other common expenses that Medicare does not cover include:
- Eye exams and eyeglasses
- Most dental care
- Medical care overseas
- Cosmetic surgery
- Massage therapy
How Much Is Taken From Your Social Security Check for Medicare?
For individuals with qualifying work history, there’s no premium for Medicare Part A. The standard monthly premium for Medicare Part B for 2023 is $164.90, down from $170.10 in 2022. The premium is automatically deducted from Social Security checks.
The Bottom Line
Medicare is a U.S. government health insurance program that subsidizes healthcare services. The plan covers people age 65 or older, younger people who meet specific eligibility criteria, and individuals with certain diseases.
As long as you are eligible to receive Social Security benefits when you turn 65, you will automatically be enrolled in Medicare Part A, which covers hospital costs, and Medicare Part B, which covers your visits to the doctor. You can enroll in other parts of Medicare once you become eligible.
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