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Terry Turner has more than 30 years of journalism experience, including covering benefits, spending and congressional action on federal programs such as Social Security and Medicare. He is a Certified Financial Wellness Facilitator through the National Wellness Institute and the Foundation for Financial Wellness and a member of the Association for Financial Counseling & Planning Education (AFCPE®).Read More
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- Published: November 10, 2021
- Updated: January 31, 2023
- 8 min read time
- This page features 12 Cited Research ArticlesKey Takeaways
- More than 64.5 million Americans were enrolled in Medicare going into 2023.
- More than 13% of Medicare beneficiaries are under the age of 65.
- 7.5% of beneficiaries are only enrolled in Medicare Part A, but 74.4% of beneficiaries are enrolled in a Medicare Part D prescription drug plan.
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.
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.The more you know about Medicare, the better you can use the program’s many benefits to your advantage.
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.
- Social Security Amendments of 1965 founded Medicare and Medicaid.
- President Harry Truman and First Lady Bess Truman were the first recipients of Medicare benefits.
- Medicare cost an estimated $767 billion in 2022 and the White House sought $846 billion for FY 2023.
- Medicare accounts for about 12% of the federal budget and 20% of all healthcare expenditures in the United States, according to the Kaiser Family Foundation.
What Are 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.
- 64.5 million Americans were enrolled in Medicare going into 2023, including 35 million in Original Medicare (Part A and Part B) and 29.5 million in Medicare Advantage or other health care plans.
- Medicare Part A covered over $187.4 billion in programs, benefitting 6.9 million people in 2020 — the most recent year for which data is available.
- Medicare Part B provided $192 billion in benefits to 32.7 million beneficiaries in that same year.
- 74.4% of Medicare beneficiaries were enrolled in a Medicare Part D for prescription drug coverage — either through a Medicare Advantage Plan or a standalone Part D plan with Original Medicare.
Medicare Part A
Medicare Part A is a hospital insurance that covers hospitalization, inpatient stays and hospice care. Part A is typically paired with Medicare Part B, though it has an independent deductible of $1,600 in 2023 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 $164.90 and a yearly $226 deductible.Medicare Part B coverage includes:
- Doctor visits
- Lab tests
- Diagnostic screenings and preventive care
- Medical equipment
- Telehealth services
- Mental health services
- Advance care planning
- Limited outpatient prescription drugs
Medicare Part C (Medicare Advantage)
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 Prescription Drug Plans
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 $31.50 in 2023.Don't Leave Your Health to ChanceFind a local Medicare plan that fits your needs by connecting with a licensed GoHealth insurance agent.
Who Is Eligible to Receive Medicare?
Medicare is available for seniors ages 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 are eligible for Medicare if they meet these requirements:
- Receive Social Security benefits for 24 or more months
- Have end-stage renal disease requiring transplant or dialysis
- Have Lou Gehrig’s disease (ALS)
- Receive a disability pension from the Railroad Retirement Board
About 86% of Medicare beneficiaries qualify by age, but a sizable portion are under the age of 65.
- 13% of Medicare beneficiaries are under the age of 65.
- 3.8 million residents enrolled in the most recent year available are new beneficiaries.
- 83% 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 for 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.If you aren't automatically enrolled:
Enroll online: Social Security Administration
Enroll by phone, weekdays 7 a.m. – 7 p.m.: 1-800-772-1213 (TTY users 1-800-325-0778)
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% of Medicare beneficiaries are satisfied with their general care.
- 44% of beneficiaries report that they wait less than a week for a doctor’s appointment.
- 71% 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 are only 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 $506 a month in 2023.
- Medicare Part B has a standard premium cost of $164.90.
- The maximum deductible for Medicare Part D is $505 in 2023.
- Individual Medicare expenditures are projected to reach $923.3 billion in 2022. This is 28.6% less than individual private insurance expenditures.
- Overall satisfaction rates and access to care, according to CMS surveys:
- Ease of Access to Doctor: 96%
- Out-of-Pocket Costs: 87%
Medicare Coverage and Funding
Inpatient hospital stays are the single most costly items covered, on average, by Medicare.
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 94% of beneficiaries receiving screenings.
- Prescriptions and doctor visits are the second and third most-used services, at 92% and 87%, respectively.
The five most common chronic medical conditions beneficiaries are treated for are:
- High blood pressure (54%)
- High cholesterol (47%)
- Arthritis (33%)
- Diabetes (26%)
- Heart disease (26%)
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 in a high-deductible health plan without supplementary health insurance plans. Medicare is a supplementary health plan, so beneficiaries lose this tax advantage.
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.Last Modified: January 31, 2023
12 Cited Research Articles
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- Ochieng, N. et al. (2022, November 1). A Relatively Small Share of Medicare Beneficiaries Compared Plans During a Recent 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/
- U.S. Centers for Medicare & Medicaid Services. (2022, September 27). 2023 Medicare Parts A & B Premiums and Deductibles 2023 Medicare Part D Income-Related Monthly Adjustment Amounts. Retrieved from https://www.cms.gov/newsroom/fact-sheets/2023-medicare-parts-b-premiums-and-deductibles-2023-medicare-part-d-income-related-monthly
- U.S. Centers for Medicare & Medicaid Services. (2022, August). CMS Fast Facts. Retrieved from https://data.cms.gov/sites/default/files/2022-08/4f0176a6-d634-47c1-8447-b074f014079a/CMSFastFactsAug2022.pdf
- Peter G. Peterson Foundation. (2022, July 5). Budget Basics: Medicare. Retrieved from https://www.pgpf.org/budget-basics/medicare
- Kaiser Family Foundation. (2022, June). The Facts About Medicare Spending. Retrieved from https://www.kff.org/interactive/medicare-spending/
- U.S. Centers for Medicare & Medicaid Services. (2022, April 27). Projected National Health Expenditure Data. Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected
- American Hospital Association. (2022, March 28). White House Releases FY 2023 Budget Request. Retrieved from https://www.aha.org/special-bulletin/2022-03-28-white-house-releases-fy-2023-budget-request
- U.S. Department of Health & Human Services. (2022, March 2). Medicare Beneficiary Enrollment Trends and Demographic Characteristics. Retrieved from https://aspe.hhs.gov/sites/default/files/documents/f81aafbba0b331c71c6e8bc66512e25d/medicare-beneficiary-enrollment-ib.pdf
- U.S. Centers for Medicare & Medicaid Services. (2022). Medicare Beneficiaries at a Glance. Retrieved from https://data.cms.gov/sites/default/files/2022-09/114379f0-c0db-4b5c-ab2e-7ac45ff46843/Medicare%20Beneficiaries%20at%20a%20Glance%20DY2020.pdf
- U.S. Centers for Medicare & Medicaid Services. (2022). Yearly Deductible for Drug Plans. Retrieved from https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/yearly-deductible-for-drug-plans
- National Institute on Aging. (2018, June 1). Heart Health and Aging. Retrieved from https://www.nia.nih.gov/health/heart-health-and-aging#prevent
- U.S. 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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