What Is Medicare?
Medicare is a U.S. federal government health insurance program that subsidizes healthcare services. The plan covers people over age 65, younger people who meet specific eligibility criteria, and individuals with certain diseases. Medicare is divided into different plans that cover a variety of healthcare situations—some of which come at a cost to the insured person. While this allows the program to offer consumers more choice 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 over 65, younger people with specific eligibility criteria, and people with certain diseases.
- Medicare is divided into four categories: Medicare Part A, Part B, Part C or Medicare Advantage, and Medicare Part D for prescriptions.
- Medicare Part A premiums are free for those who made Medicare contributions for 10 or more years through their payroll taxes.
- Patients are responsible for paying premiums for other parts of the Medicare program.
How Medicare Works
Medicare is a national healthcare program funded by the U.S. federal government. Congress created the program as part of the Social Security Act in 1965 to give coverage to people over the age of 65 who didn't have any health insurance.
The program is now administered by the Centers for Medicare and Medicaid Services (CMS) and extends coverage to include people with certain disabilities, as well as those who have end-stage renal disease and amyotrophic lateral sclerosis (ALS), or Lou Gehrig's disease. There are four different parts to Medicare, all of which provide different types of services for the insured:
Eligibility depends on certain criteria. Anyone who has lived in the U.S. for at least five years and is 65 or older qualifies for Medicare coverage. Enrollment in both Parts A and B is automatic for anyone who receives Social Security benefits. Part D coverage is optional and enrollment must be done by the patient.
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, though the program waives this requirement for those with ALS and for those with permanent kidney failure. Enrollment can be done through the Social Security Administration's website.
Anyone with ALS automatically qualifies for Medicare, regardless of age.
Premiums for Medicare Part A are free if an insured person or their spouse contributed to Medicare for 10 or more years through their payroll taxes. Patients are responsible for paying premiums for other parts of the Medicare program.
The program is funded through a variety of sources. U.S. taxpayers contribute to the program through the Federal Insurance Contributions Act (FICA), which goes toward Social Security and Medicare deductions. As of 2020, employees contribute a total of 7.65% of their paychecks to these programs—6.2% to Social Security and 1.45% to Medicare. Employers also pay the same percentage on behalf of the employee.
When Am I Eligible For Medicare?
Types of Medicare Coverage
As mentioned above, there are four different kinds of Medicare programs available to individuals. Basic Medicare coverage comes predominately via Parts A and B—also called Original Medicare—or through the Medicare Part C plan. Individuals may also opt to enroll in the Medicare Part D plan.
Medicare Part A
Medicare Part A covers costs billed by hospitals or similar inpatient or inpatient-like settings, such as skilled nursing facilities, as well as hospice and some home-based health care. This plan, though, doesn't cover long-term or custodial care. Coverage is automatic for anyone who receives Social Security benefits. For those who don't receive checks, enrollment can be done through the Social Security website.
Deductibles and coinsurance for Part A for 2020 are set as follows:
- Inpatient hospital deductible: $1,408
- Daily coinsurance for the 61st to 90th day: $352
- Daily coinsurance for lifetime reserve days: $704
- Skilled nursing facility coinsurance for days 21 though 100: $176
Medicare Part B
Medicare Part B generally covers costs for things like outpatient care such as doctor visits. Part B also covers preventive services, ambulance services, certain medical equipment, and mental health coverage. Some prescription drugs also qualify under this plan. The standard monthly premium for this plan for 2020 is $144.60, while the deductible is $198. Premiums are higher for anyone whose annual income is more than $87,000 ($174,000 for married couples).
Medicare Part C
These plans, also known as Medicare Advantage, must offer coverage that is at least equivalent to Original Medicare (Plans A and B). Consumers purchase Medicare Advantage plans through private insurers rather than through the government itself. Many of these plans offer annual limits on out-of-pocket costs. Many also provide benefits that Original Medicare patients would otherwise need to purchase via supplemental insurance such as a Medigap plan, and may include copays, coinsurance, deductibles, and even costs related to insurance while traveling outside the U.S. Some plans may also include dental, vision, and hearing care.
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 CARES Act of 2020
On March 27, 2020, President Trump signed a $2 trillion coronavirus emergency stimulus package, called the CARES (Coronavirus Aid, Relief, and Economic Security) Act, into law. It expands Medicare's ability to cover treatment and services for those affected by COVID-19. The CARES Act also:
- Increases flexibility for Medicare to cover telehealth services.
- Authorizes Medicare certification for home health services by physician assistants, nurse practitioners, and certified nurse specialists.
- Increases Medicare payments for COVID-19-related hospital stays and durable medical equipment.
For Medicaid, the Families First Coronavirus Response Act (FFCRA) clarifies 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 both. While Medicare is meant for those over 65 and younger people with certain health conditions, Medicaid is a joint federal and state program that provides health care coverage to people with low incomes. Recipients are required by their state to have a limited amount of liquid assets.
Anyone with Medicaid coverage is eligible to receive different services such as doctor and nursing services, x-rays, hospitalization, home health care, and lab and x-ray services. Some states may also extend patients' prescription drug coverage, physical therapy, dental services, and medical transportation.