Health United States 2020-2021

Medicare

A nationwide program providing health insurance coverage to selected groups, regardless of income. The major covered groups are (a) most people aged 65 and over; (b) people entitled to Social Security or Railroad Retirement disability benefits for at least 24 months (with the waiting period waived or reduced in certain situations); (c) government employees or spouses with Medicare-only coverage who have been disabled for more than 29 months (with the waiting period waived or reduced in certain situations); (d) most people with end-stage renal disease; and (e) certain people in the Lincoln County, Montana, vicinity who have been diagnosed with asbestos-related conditions. The program was enacted on July 30, 1965, as Title XVIII of the Social Security Act, “Health Insurance for the Aged and Disabled,” and became effective on July 1, 1966.

From its inception, Medicare has included two separate but coordinated programs: Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B). Part C (Medicare Advantage) was established by the Balanced Budget Act of 1997 (originally as Medicare+Choice) as an expanded set of options for the delivery of health care under Medicare. Although all Medicare beneficiaries can receive their benefits through the original fee-for-service program, most beneficiaries enrolled in both Part A and Part B have the option to participate in a Medicare Advantage plan instead.

Organizations that seek to contract as Medicare Advantage plans must meet specific organizational, financial, and other requirements. Although most Medicare Advantage enrollees are in coordinated care plans, such as health maintenance organizations and preferred provider organizations, Medicare Advantage plans also include private fee-for-service plans, provider-sponsored organizations, special needs plans, medical savings account plans (which provide benefits after a single high deductible is met), and certain other types of plans. Medicare Advantage plans are generally paid on a capitation basis—that is, plans are paid a predetermined amount per member per month, which is adjusted according to the health status of the plans’ members—and are required to provide at least those services covered by Parts A and B, except hospice services. Plans may (and in certain situations must) provide extra benefits (such as vision or hearing coverage) or reduce cost sharing or premiums.

The Medicare Prescription Drug, Improvement, and Modernization Act (also called the Medicare Modernization Act, or MMA) was passed on December 8, 2003. MMA (P.L. 108–173) established a voluntary prescription drug benefit for Medicare beneficiaries and created a new Medicare Part D. People eligible for Medicare could begin to enroll in Part D beginning in January 2006.

Many people with Medicare have supplemental insurance coverage that may cover Medicare cost sharing, such as copayments, or provide additional benefits. Beneficiaries may enroll in Medicare Advantage managed care plans, which can include other benefits such as dental and prescription drug benefits. Other Medicare beneficiaries with Medicaid, employer- or union-sponsored plans, private Medigap policies, or military coverage also receive additional benefits. For more information see: Chapter 3, Medicare beneficiary and other payer financial liability, in “A Data Book: Health Care Spending and the Medicare Program” for 2021, available from: https://www.medpac.gov/document-type/data-book/. For more information on Medicare, see: https://www.medicare.gov/Pubs/pdf/10050-Medicare-and-you.pdf and https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMSProgramStatistics/index.html. (Also see Sources and Definitions, Fee-for-service health insurance; Health insurance coverage; Health maintenance organization [HMO]; Managed care.)

Page last reviewed: August 12, 2022