Medicare programs were first launched in 1965 and have provided medical relief to millions of seniors and Americans with disabilities and chronic health conditions. If you’ve ever wondered how Medicare works, how it benefits U.S. residents and other facts about Medicare, this guide highlights the details you need to know.

Key Takeaways
  • 63.3 million Americans are enrolled in Original Medicare, including Medicare Part A and/or Part B, in 2021.
  • 14% of Medicare beneficiaries are under the age of 65.
  • 96% percent of Medicare beneficiaries are satisfied with their general care.
  • 57% of beneficiaries are treated for high blood pressure.
  • High blood pressure screenings are the most-used Medicare service.

What Is Medicare?

Medicare is an entitlement program designed to cover medical expenses for eligible U.S. residents. The program is provided by the Centers for Medicare & Medicaid Services (CMS), a division of the U.S. Department of Health & Human Services (HHS).

As an entitlement program, most Americans earn the right to enroll in Medicare as taxpayers who contribute to the system. Medicare benefits provide health services to seniors 65 and older, Americans with approved medical conditions and those with qualifying disabilities.

Medicare benefits vary depending on the enrollment plan beneficiaries choose. Medicare is made up of four enrollment plans — Medicare Part A, Part B, Part C and Part D.

What Are the Four Parts of Medicare?

The Four Parts of Medicare

Medicare is segmented into four parts that cover different services for beneficiaries. Original Medicare is the most common form of Medicare, which includes Medicare Part A and Medicare Part B.

  • 63.3 million Americans are enrolled in Medicare Part A and/or B in 2021. Approximately 87 percent of these beneficiaries are enrolled because of their age, while 13 percent are enrolled for disability coverage.
  • Medicare Part A covered over $193 billion in programs, benefitting 7.5 million people in 2019.
  • Medicare Part B provided $207 billion in benefits to 33.7 million beneficiaries in 2019.
  • 74 percent of residents enrolled in Original Medicare are also enrolled in Medicare Part D for prescription drug coverage.

Medicare Part A

Medicare Part A is a hospital insurance that covers hospitalization, inpatient stays and hospice care. Medicare Part A is typically paired with Medicare Part B, though it has an independent deductible of $1,484 in 2021 to be paid before Medicare covers expenses.

Medicare Part A coverage includes:
  • Inpatient hospital care
  • Skilled nursing facilities
  • Hospice care
  • Home health care

Medicare Part B

Medicare Part B covers outpatient medical care, excluding dental and vision benefits. Medicare Part B requires a minimum monthly premium of $148.50 and a yearly $203 deductible.

Medicare Part B coverage includes:
  • Doctor visits
  • Lab tests
  • Diagnostic screenings and preventative care
  • Medical equipment
  • Telehealth services
  • Mental health
  • Advance care planning
  • Limited outpatient prescription drugs

Medicare Part C

Medicare Parts C and D are not included as part of Original Medicare coverage and seniors will not be automatically enrolled in these benefits.

Medicare Part C is a private insurance opportunity to receive Medicare benefits. This includes all Original Medicare coverage, and often offers vision, dental and some prescription drug coverage. Costs vary between Medicare Advantage plans.

Medicare Part D

Medicare Part D is provided by private insurers and includes prescription drug coverage. The prescription drugs covered by Medicare Part D are determined by the formulary associated with your specific plan.

Medicare Advantage plans include Medicare Part D, though it must be purchased separately when enrolled in Original Medicare. The average monthly premium is $33 in 2021.

Who Is Eligible to Receive Medicare?

Medicare is available for seniors age 65 and older and permanent U.S. residents with qualifying disabilities and chronic medical conditions.

U.S. citizens and permanent residents who have been in the U.S. for over five years and worked at least 10 years paying Medicare taxes may qualify. Beneficiaries must also be eligible for Social Security benefits, even if they’re not currently receiving them.

Residents who don’t meet all requirements may still qualify for Medicare benefits at a higher premium.

U.S. residents under 65 years old are eligible for Medicare if they meet these requirements:
  • Receive Social Security benefits for 24+ months
  • Have end-stage renal disease requiring transplant or dialysis
  • Have Lou Gehrig’s disease
  • Receive a disability pension from the Railroad Retirement Board
Medicare Beneficiaries by Age
  • 14 percent of Medicare beneficiaries are under the age of 65.
  • 2.8 million residents enrolled in 2021 are new beneficiaries.
  • 82 percent of beneficiaries live in urban metro areas.

How Do You Enroll in Medicare?

Americans receiving Social Security or Railroad Retirement Board benefits may automatically be enrolled in Medicare. Residents 65 years and older must receive benefits at least four months before turning 65 to enroll automatically. Those under 65 must have received benefits for at least 24 months to enroll.

Eligible residents who aren’t automatically enrolled can register online, by phone or at their local Social Security office.

Your initial Medicare enrollment period is the best time to sign up. Initial enrollment begins three months before the first day of the month of your 65th birthday, and ends four months after your birthday month.

Medicare open enrollment is available between Oct. 15 and Dec. 7 every year.

  • 96 percent of Medicare beneficiaries are satisfied with their general care.
  • 42 percent of beneficiaries report they wait less than a week for a doctor’s appointment.
  • 71 percent of Medicare beneficiaries don’t compare plans during open enrollment.

Who Pays for Medicare?

Medicare is funded in part by the Social Security Administration, which is supported by U.S. tax dollars. Beneficiaries may also be required to pay premiums to support their benefits.

The U.S. Treasury maintains two trust funds that may only be applied to Medicare funding.

The Hospital Insurance (HI) trust fund collects funds from payroll taxes, income taxes, interest generated from trust fund investments and Medicare Part A premiums. These funds support Medicare Part A benefits and Medicare program administration costs.

The Supplementary Medical Insurance (SMI) trust fund is funded by Congress, Medicare Parts B and D premiums, and interest generated from trust fund investments. This trust fund covers Medicare Part B benefits, Medicare Part D and Medicare program administration costs.

  • Medicare Part A benefits are typically free, but premiums may be required for enrollees who don’t meet all criteria. Medicare Part A premiums are $471 a month in 2021.
  • Medicare Part B has a standard premium cost of $148.50, and may reach as high as $504.90 in 2021.
  • The maximum deductible for Medicare Part D is $445, with an initial coverage limit of $4,130.
  • Individual Medicare expenditures are projected to reach $923.3 billion in 2022. This is 28.6 percent less than individual private insurance expenditures.
  • Average Medicare payments between Medicare’s contributions and beneficiary cost shares are:
    • Inpatient hospital stay: $14,234
    • Outpatient emergency visit: $1,069
    • Doctor visit: $98
    • 30-day prescription: $72

Medicare Coverage

2022 Medicare Funding & What It Covers

Medicare benefits cover a variety of services including hospital costs, medical care, rehabilitation, hospice care and more. Benefits vary depending on your Medicare enrollment plan.

Medicare doesn’t cover custodial care, like long-term medical assistance. Original Medicare also doesn’t cover dental and vision care. Medicare Part C plans may provide these services.

  • Blood pressure screenings are the most used Medicare benefit, with 96 percent of beneficiaries receiving screenings.
  • Prescriptions and doctor visits are the second and third most-used services, at 93 percent and 89 percent, respectively.
  • The five most common chronic medical conditions beneficiaries are treated for are:
    • High blood pressure (57 percent)
    • High cholesterol (49 percent)
    • Arthritis (34 percent)
    • Diabetes (27 percent)
    • Heart disease (27 percent)

Can You Have an HSA With Medicare?

Medicare recipients aren’t eligible to contribute pre-tax income to a health savings account (HSA) and may be charged a penalty on any new money deposited into an HSA. Beneficiaries can, however, withdraw money from existing HSA accounts to cover Medicare costs.

Individuals qualify for an HSA when they are enrolled into a high-deductible health plan without supplementary health insurance plans. Medicare is a supplementary health plan, so beneficiaries lose this tax advantage.

Considerations

Medicare offers four programs to cover everything from hospital stays to prescription drug costs, so carefully consider your needs prior to enrolling. Plan ahead to understand your Medicare benefits before your initial enrollment period.

Medicare provides medical benefits to millions of U.S. residents each year. As an entitlement program, most Americans are eligible to receive Medicare benefits once they reach the age of 65 or are diagnosed with a disability or chronic illness.

Know the facts about Medicare so you can enroll with confidence and care for your health in your golden years. If you’re working into retirement, consider how Medicare impacts your employee benefits.

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Last Modified: November 15, 2021

6 Cited Research Articles

  1. Kaiser Health News, (October 2021). Seven in Ten Medicare Beneficiaries Did Not Compare Plans During Past Open Enrollment Period. Received from https://www.kff.org/medicare/issue-brief/seven-in-ten-medicare-beneficiaries-did-not-compare-plans-during-past-open-enrollment-period/
  2. Centers for Medicare & Medicaid Services. (2021). Medicare Beneficiaries at a Glance. Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Beneficiary-Snapshot/Bene_Snapshot
  3. Centers for Medicare & Medicaid Services. (July 2021). CMS Fast Facts. Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMS-Fast-Facts
  4. Centers for Medicare & Medicaid Services. (2018). Projected National Health Expenditure Data. Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected
  5. National Institute on Aging. (June 2018). Heart Health and Aging. Retrieved from https://www.nia.nih.gov/health/heart-health-and-aging#prevent
  6. Centers for Medicare & Medicaid Services. (2015). CMS 50 Facts in 50 Days. Retrieved from https://www.cms.gov/Outreach-and-Education/Look-Up-Topics/50th-Anniversary/50-Facts-in-50-Days-Pt1.pdf
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