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Key Facts Concerning Medicare

January 22, 2017

Medicare represents one of the most significant federal social insurance programs in existence. The purpose of Medicare is to supply health insurance coverage through private carriers to Americans aged 65 and older who have paid into the system through employment over their lifetimes. It is possible for younger individuals to receive coverage as well, provided that they have a qualifying disability or have been diagnosed with terminal renal disease or amyotrophic lateral sclerosis.

The Medicare system was established by the administration of President Lyndon Johnson in 1965. This was done pursuant to Title XVII of the Social Security Act. This legislation committed the federal government to providing for senior citizens welfare regardless of their medical history or income level. Though the system has undergone multiple changes over the past decades, it has functioned in an uninterrupted manner.

The agency responsible for the oversight is the Center for Medicare and Medicaid Services, often referred to simply as CMS. The officials at CMS are also tasked with implementing insurance industry reforms passed as part of 1996’s Health Insurance Portability and Accountability Act. The Chief Actuary of CMS supplies yearly accounting updates and cost projections to the Board of Trustees in order to keep the system’s financial future as sound as possible.

Funding comes from multiple sources. Medicare Part A receives funding from general revenue gleaned from workers as well as employers. Individuals who are self-employed are required to pay taxes on their behalf to ultimately support the Medicare benefits they will receive. Parts B and D are funded in part by insurance premium payments. These amounts are paid by those who have decided to enroll in the program and are supplemented by amounts drawn from general revenue.

Eligibility for benefits may vary based on an individual’s willingness to pay supplemental premiums. Broadly speaking, anyone 65 years of age or older who has lived in the country for at least five years will be eligible to receive Medicare insurance coverage.

Citizens 65 and older as well as permanent legal residents of no less than 5 years may be able to receive a waiver of Part A premium payments, provided they have paid Medicare taxes for at least 10 years. This is also true for individuals with documented disabilities or those who undergo dialysis treatment for end-stage kidney disease and those requiring a transplant.

There are four primary subdivisions of the Medicare system, the relevance of each to an individual will largely depend on their specific medical needs. Part A is intended to cover hospitalization. Part B is another key element of medical treatment insurance for various types of care. Part C is a supplemental program known as Medicare Advantage while Part D is intended to provide coverage for prescription drugs.

One of the main benefits of this coverage, as opposed to traditional private health insurance, is the fact that it is part of a broader social insurance structure, which is meant to provide guaranteed benefits for those meeting qualification criteria. These benefits are paid for in large part by employment taxes designed to limit premium obligations for senior citizens and some disabled Americans.

On the flip side, however, is the fact that the federal government cannot legally lower program costs by limiting eligibility among those 65 and older or those with serious disabilities. This can lead to uncertainty about future funding sources, particularly as large segments of the population continues to get older.


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