Medicare

Medicare is the federal program that provides health insurance for people age 65 and over, as well as people with disabilities. Chances are that you or someone in your family is covered by Medicare today. Those of us who are not covered by Medicare today are Medicare beneficiaries of the future. This is because eligibility for Medicare is not based on income. You qualify for Medicare when you turn 65 based on your work history, just like you become eligible for Social Security benefits.

Medicare was established in 1965 because there was no reliable way for many seniors to get health insurance after they retired. Medicare solved this problem by guaranteeing health insurance to all seniors regardless of health status. Coverage for people with disabilities was added in 1972. Today, Medicare covers about 43 million Americans.

Fast facts on Medicare:

• Of the 43 million Americans with Medicare, 85 percent are seniors, and 15 percent are people with disabilities under age 65.
• People with Medicare are poorer on average than most Americans. 47 percent have incomes below 200 percent of the federal poverty level ($20,800 for an individual in 2008).
• Medicare has four parts: A, B, C, and D. Part A covers hospital care. Part B covers outpatient care. Part C combines hospital and outpatient care under a private health insurance plan called "Medicare Advantage." It often also covers prescription drugs. Part D covers prescription drugs.
• Medicare Parts A and B are available directly from the federal Medicare program. Part C (Medicare Advantage) and Part D prescription drug coverage are only available through private plans.
• The traditional Medicare program administered by the federal government is very efficient. It only spends 3 percent or less on administrative costs, compared to an average of 12 percent for private insurance companies.
• Private Medicare Advantage plans -- which cover only 20 percent of Medicare beneficiaries -- cost on average 13 percent more to provide care than it costs traditional Medicare to provide care to the same people.
• Medicare is prohibited from negotiating directly to purchase prescription drugs, even if it could purchase in bulk and get a better price than private insurers.
• The Medicare payroll tax on your paystub goes to pay for Part A hospital care. If you have enough work history when you retire, you will not have to pay a Part A Medicare premium.
• Most people with Medicare have some form of additional, or "supplemental," insurance. This insurance may come from a former employer, Medicaid, private Medigap plans, or some other government program like the Veterans Administration.
• People with disabilities must usually wait 24 months after their disability begins before they qualify for Medicare.
• Baby boomers are not a major threat to the financial health of Medicare. Three-fourths of the of the expected increase in Medicare costs over the next three decades is due to rising health care costs. Only one-fourth is due to the aging of the baby boomers. Rising health care costs are a much more serious problem, and they affect Medicare just as they affect everyone else.