Medicare is a government-run health insurance program managed by the Centers for Medicare & Medicaid Services (CMS). It is designed primarily for Americans who are 65 or older, although younger people with qualifying disabilities or certain medical conditions may also be covered.
The Origins of Medicare
President Lyndon B. Johnson signed Medicare into law in 1965 to fill the gap in affordable health coverage for senior citizens. The program now provides health insurance to over 65 million Americans nationwide.
How Does Medicare Work?
Medicare is structured into multiple parts, each responsible for covering different healthcare services:
- Part A (Hospital Insurance) pays for inpatient hospital care, skilled nursing facility stays, hospice services, and certain home health care.
- Part B (Medical Insurance) pays for physician visits, outpatient services, preventive care, and durable medical equipment.
- Part C (Medicare Advantage) is offered by private insurance companies as an alternative to Original Medicare, typically combining Part A, Part B, and often Part D under one plan.
- Part D (Prescription Drug Coverage) assists with the cost of prescription medications.
How Is Medicare Funded?
Medicare receives funding from several sources:
- Payroll taxes paid by employees and employers
- Monthly premiums from enrolled beneficiaries
- General revenue from the federal government
- Investment income earned by the Medicare trust funds
The majority of enrollees pay no premium for Part A, provided they or their spouse contributed Medicare payroll taxes for at least 10 years (40 quarters). Part B carries a monthly premium that varies based on your income level.
What Isn't Covered by Medicare?
Despite its broad scope, Medicare does not cover all healthcare expenses. Common exclusions include:
- Long-term custodial care (such as nursing home assistance with daily activities)
- Routine dental, vision, and hearing services (under Original Medicare)
- Cosmetic procedures
- Healthcare received outside the United States (with rare exceptions)
To address these gaps, many enrollees add supplemental insurance such as Medigap plans or opt for Medicare Advantage coverage.
How to Begin with Medicare
If you are nearing age 65 or have recently qualified through a disability, it is important to explore your Medicare options early. Your Initial Enrollment Period starts three months before the month you turn 65 and continues for three months afterward, providing a seven-month window to enroll.
Reviewing and comparing available plans can help you select coverage that aligns with both your healthcare needs and your budget.