Medicare Overview

Medicare is the federal health insurance program created in 1965 for people ages 65 and over, regardless of income, medical history, or health status. The program was expanded in 1972 to cover certain people under age 65 who have a long-term disability.

Medicare serves approximately one in six Americans and virtually all of the population aged 65 and older. In 2020, the program will cover an estimated 63 million persons (54 million aged and 9 million disabled). All beneficiaries are entitled to the same coverage regardless of income or medical history.

Funding for Medicare benefits is considered mandatory spending and is not subject to the annual congressional appropriations process.

Most persons aged 65 or older are automatically entitled to premium-free Part A because they or their spouses paid Medicare payroll taxes for at least 10 years. Persons under the age of 65 who receive cash disability benefits from Social Security for at least 24 months and individuals of any age with end-stage renal disease (ESRD) are also entitled to Medicare Part A. Eligible individuals who are not entitled to premium-free Part A may obtain coverage by paying a monthly premium.

All persons entitled to Part A may enroll in Part B by paying a monthly premium ($144.60 in 2020). Some Part B enrollees may pay less due to a “hold-harmless” provision in the Social Security Act. Beneficiaries with high incomes pay higher premiums, and those with low incomes may qualify for premium assistance through their state Medicaid programs.

When beneficiaries first become eligible for Medicare, they may enroll in either original Medicare or a private MA plan. Beneficiaries may also choose to enroll in a Part D plan at this time. There is an annual open enrollment period each fall during which Medicare beneficiaries may choose a different MA and/or Part D plan or may choose to leave or join the MA and/or Part D programs.

Beneficiaries generally pay monthly premiums for Part D, and there may be an additional premium for those who choose to enroll in MA (Part C). Premiums for Parts C and D vary by plan. Similar to Part B, some high-income enrollees pay higher premiums for Part D and the Part D program provides assistance to low-income enrollees.

Individuals who do not enroll in Part B or Part D when they first become eligible for Medicare may pay a permanent penalty of increased monthly premiums if they choose to enroll at a later date.