Medicare is a federal program that provides health insurance coverage, primarily for elderly and disabled people. Unlike Medicaid, it's not specifically geared to those with the lowest incomes and most limited financial resources. Instead, it provides a safety net for people who might otherwise lack access to affordable health insurance because of age or poor health.
Filling the Gap
As of 2014, 55 percent of employers offered health insurance as part of their benefits package, according to the Henry J. Kaiser Foundation. Retirees don't have access to this source of insurance, so Medicare's purpose is to fill the gap for senior citizens no longer in the workforce.
Medicare has the additional purpose of providing a safety net for people of any age who are too ill or disabled to work.
Who Is Covered
Medicare primarily covers U.S. citizens and permanent residents age 65 and over who have paid into the federal insurance system through payroll taxes. It also covers their spouses, widows, widowers and dependents. For example, Medicare covers everyone who qualifies for Social Security or railroad retirement benefits, as well as most federal employees.
Some people who haven't paid sufficient payroll taxes may qualify for Medicare by paying premiums.
Medicare also covers people who have received Social Security disability benefits for more than two years, and some disabled railroad workers. In addition, it covers people with permanent kidney failure who need a transplant or dialysis.
Original Medicare Coverage and Premiums
Original Medicare is operated by the federal government. Part A coverage pays for hospital expenses, including inpatient stays, hospice care, skilled nursing care and limited home health care. This part is free to most who have paid payroll taxes.
The second part of original Medicare, Part B insurance, costs most people $104.90 each month as of 2015. Its purpose is to pay for doctor visits and services, preventive care such as check-ups, medical equipment and supplies and outpatient services.
Part D is an add-on to original Medicare with the purpose of providing prescription drug coverage.It's available through insurance companies, and the amount of the premium depends on the insurance company.
Medicare Advantage Plans
Medicare contracts with private insurance companies to offer Medicare Advantage plans, also called Part C. Medicare Advantage provides additional choices beyond original Medicare. The many varieties of Part C plans include health maintenance organizations, preferred provider organizations and special needs plans.
All Advantage plans must offer at least as much hospital and medical coverage as original Medicare, and many offer prescription coverage as well. Some offer additional coverage, including vision or dental. Most plans charge the same Part B premium as original Medicare and an additional Advantage premium.
How Medicare Works
Medicare doesn't pay all your medical costs after premiums. With original Medicare, you must pay a yearly deductible for Part A coverage of $1,260 as of 2015. In addition, you'll pay coninsurance for any hospital stay beyond 60 days in a benefit period.
In original Medicare, you must also pay a Part B medical deductible of $147 per year and 20 percent of many services after the deductible, current as of 2015.
For Part D prescription coverage, the amount of the deductible and copayment or coinsurance depends on the insurance company and plan.
If you have original Medicare, you can buy supplemental insurance, called Medigap, to pay some of your deductibles and other costs, but Medigap isn't available for Advantage plans.
Your costs for deductibles, coinsurance and copayments with Advantage plans depend on your choice of insurance company and plan.
- Medicare.gov: What Is Medicare?
- Aging Services Council of Central Texas: Medicare & Medicaid
- The Henry J. Kaiser Family Foundation: 2014 Employer Health Benefits Survey
- Medicare.gov: What Medicare Covers
- Medicare.gov: How Original Medicare Works
- Medicare.gov: Medicare Advantage Plans Cover All Medicare Services
- Medicare.gov: Medicare 2015 Costs at a Glance
- Medicare.gov: What's Medicare Supplement Insurance (Medigap)?
- Medicare.gov: What Is Medicaid?
- Medicare.gov: Medicare