U.S. citizens and legal residents age 65 and older, regardless of their income or medical history are eligible for Medicare. In 1972, the Medicare program was expanded to include people under age 65 with permanent disabilities and those with end-stage renal disease or Lou Gehrig’s disease.
Most people age 65 and older are entitled to Medicare Part A if they or their spouse are eligible for Social Security payments and have made payroll tax contributions for 10 or more years.
People under age 65 who receive Social Security Disability Insurance (SSDI) generally become eligible for Medicare after a two-year waiting period, while those with End Stage Renal Disease and Lou Gehrig’s disease become eligible for Medicare when they begin receiving SSDI payments.
According to The Basics: Medicare, National Health Policy Forum (2013), Medicare consists of four parts and covers the following:
Part A (Hospital Insurance program)
Most people do not have to pay a premium for Part A because either they or their spouse already paid for it through their payroll taxes. Some pay a monthly premium to enroll. Part A covers the following services: inpatient care in hospitals, blood for transfusions, home health care that follows a minimum of a three day hospital stay, hospice care, religious nonmedical health care institutions, and skilled nursing facility care for 100 days per benefit period following a minimum three-day hospital stay (not custodial or long-term care).
Part B (Supplementary Medical Insurance
Most people pay a monthly premium for Part B. It pays for some medical services that Part A does not as well as supplies when they are medically necessary. Part B covers the following services: physician services (including office visits); services provided by nonphysicians, such as physician assistants and nurse practitioners; durable medical equipment; clinical laboratory and diagnostic services; outpatient hospital services; physical, occupational, and speech therapy; home health care that is not preceded by a hospital stay; transitional care management services; blood for transfusions; one-time “Welcome to Medicare” preventive physical exam and annual wellness exam; some screening tests, such as mammograms and pap smears, and tests for diabetes, glaucoma, prostate and colorectal cancers, and cardiovascular disease; some types of orthopedic shoes and inserts for those with severe diabetes; some outpatient mental health care services; certain prescription drugs that are not self-administered by the beneficiary; ambulance services; kidney dialysis; occupational and physical therapy; smoking cessation; physician visits and tests under clinical research studies; and ambulatory surgery center services.
Part C (Medicare Advantage program)
Covers Part A and B services and most prescription drugs for beneficiaries who enroll in private health insurance plans such as health maintenance organization (HMO), preferred provider organization (PPO), or private fee-for-service (PFFS) plan. These plans receive payments from Medicare to provide Medicare-covered benefits, including hospital and physician services, and in some cases, prescription drug benefits.
Part D (Prescription Drug Coverage)
Provides outpatient prescription drug coverage that is delivered through private plans that contract with Medicare. The benefit includes additional assistance with plan premiums and cost-sharing amounts for low-income beneficiaries. People enrolled in Medicare drug plans pay a monthly premium.
According to The Basics: Medicare, National Health Policy Forum (2013), Medicare is financed by the following:
Because of the heavy dependence on Medicare revenues of most rural hospitals and health care delivery systems, Medicare has been a central issue to rural health care stakeholders. The network of providers that serves rural Americans is fragile and more dependent on Medicare revenue because of the high percentage of Medicare beneficiaries who live in rural areas. Additionally, rural residents on average tend to be older, lower income, and suffer from higher rates of chronic illness then their urban counterparts.
Due to the low volume of services provided, many rural providers face special circumstances that would make financial viability under traditional Medicare Prospective Payment Systems (PPS) difficult if not impossible. Many times the existence of those providers are essential for ensuring access to care for rural Medicare beneficiaries. As a solution, several types of special rural designations have been created, which are listed below:
For more information about these and other providers and designations, please refer to the Centers for Medicare & Medicaid Services website. For more information on billing practices for these and other rural providers, please refer to the Medicare Billing Information for Rural Providers, Suppliers, and Physicians, Centers for Medicare & Medicaid Services, 2013.
Medicare faces many challenges, including how to finance care for an aging population with a declining ratio of workers to beneficiaries.
According to the Fact Sheet: Medicare at a Glance, Kaiser Family Foundation (2012), federal spending on Medicare is expected to continue to grow with the aging population and the new drug benefit. The annual growth in Medicare spending is influenced by the increasing volume and utilization of services and higher prices for health care services. Part A Trust Fund reserves are projected to be exhausted in 2018.
Other future challenges include ensuring the successful implementation of the drug benefit, setting fair payments to providers and plans, improving care for those with multiple chronic conditions, and providing adequate financial protections for those with low incomes. Ensuring Medicare’s financial stability, while providing for the health care needs of an aging population, is a pressing challenge for the United States.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) provides elderly and disabled people on Medicare access to prescription drug coverage from private prescription drug plans. Medicare beneficiaries can choose from two or more drug plans in their area. People who choose to enroll in a drug plan pay a monthly premium to receive prescription drug benefits, and deductible and copayment costs may also apply. Assistance with paying premiums, deductibles and copayments is available to low-income beneficiaries. For an overview of the Medicare Prescription Drug Benefit, please see the Kaiser Family Foundation's fact sheet The Medicare Prescription Drug Benefit.
Open enrollment for Medicare beneficiaries occurs from October 15 - December 7. If changes are made during open enrollment, your coverage will begin on January 1 of the following year. In certain situations, you may be able to join, switch, or drop Medicare drug plans at other times. These include: if you permanently move out of your drug plan's service area; your plan stops offering prescription drug coverage; or you enter, live in, or leave a nursing home. For further information on enrollment, see Understanding Medicare Enrollment Periods.
According to the April 2013 RUPRI Center for Rural Health Policy Analysis Rural Health Brief, September 2012: Medicare Advantage Enrollment Update, as of September 2012, approximately 1.8 million rural Medicare beneficiaries were enrolled in Medicare Advantage.
Last Reviewed: 5/24/2013