What is Medicare?

Medicare is administered by the U.S. Federal Government.

The Medicare program guarantees access to health insurance for Americans ages 65 and older. This program is also available to younger people with disabilities.

In 1965, Congress created Medicare to provide health insurance to people age 65 and older, regardless of income or medical history. In 1972, Congress expanded Medicare eligibility to younger people who have permanent disabilities and receive Social Security Disability Insurance (SSDI) payments and those who have end-stage renal disease (ESRD). Congress further expanded Medicare in 2001 to cover younger people with ALS, or Lou Gehrig’s disease.

In 2011, Medicare provided health insurance to 48 million Americans including 40 million people age 65 and older and eight million younger people with disabilities. Medicare serves a large population of old, sick, and low-income people. Without Medicare, many of these people would not have access to health insurance and would have to forgo needed medical care.

Medicare has four parts: A, B, C, and D.

Part A (the Hospital Insurance program), which covers inpatient hospital, skilled nursing facility, home health, and hospice care.

Part B (the Supplementary Medical Insurance program), which covers physician, outpatient, home health, and preventive services (Medicare Parts A and B cover all “reasonable and necessary” medical services and hospital services, including lab tests, skilled nursing and some home health care and excluding vision, hearing, dental and long-term care).

Part C (Medicare Advantage), which allows Medicare enrollees to participate in private health plans that must cover all the Part A and B benefits as an alternative to traditional Medicare.

Part D, which covers outpatient prescription drugs, also through private plans.

Medicare today offers enrollees the choice of an open-network plan (traditional Medicare) or a network plan (Medicare Advantage) with a standard benefit package.

The overwhelming majority of people with Medicare have traditional Medicare (76 percent) and the rest have a Medicare Advantage plan (24 percent). With traditional Medicare, the federal government pays directly for health care. With Medicare Advantage, the federal government pays private health plans, which can offer additional benefits to provide health coverage. Medicare enrollees generally have Parts A and B. If they elect to participate in Medicare Advantage, they also will have Part C. In addition, if they need prescription drug coverage, they might have Part D.