10.2 Medicare: Coverage, funding, and future sustainability
5 min read•july 31, 2024
Medicare is a vital health insurance program for older adults in the US. It covers hospital stays, outpatient care, and prescription drugs through various parts and plans. Eligibility typically begins at 65, with special provisions for certain disabilities and conditions.
Funding for Medicare comes from payroll taxes, , and . However, rising healthcare costs and an aging population strain its financial sustainability. Policymakers are exploring reforms to ensure Medicare's long-term viability while maintaining quality care for .
Medicare Coverage
Types of Medicare Plans
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Medicare divides into four distinct parts
Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care services
Part B covers outpatient care, preventive services, medical supplies, and certain doctors' services (specialist visits)
Part C (Medicare Advantage) combines Part A and B coverage, often including additional benefits (vision, hearing, dental care)
Part D provides prescription drug coverage through private insurance companies
policies supplement Original Medicare (Parts A and B) by covering out-of-pocket costs (deductibles, copayments, coinsurance)
Eligibility and Enrollment
Medicare coverage eligibility criteria include
Age 65 and older
Disability status
Certain medical conditions (End-Stage Renal Disease)
Enrollment periods vary by plan type and individual circumstances
Initial Enrollment Period spans 7 months around 65th birthday
Annual Open Enrollment Period occurs October 15 - December 7
Special Enrollment Periods available for qualifying life events (job loss, relocation)
Coverage Details and Limitations
Part A coverage includes
Inpatient hospital care (up to 60 days per benefit period with $0 coinsurance)
Skilled nursing facility care (up to 20 days per benefit period with $0 coinsurance)
Hospice care (little to no cost for terminally ill patients)
Part B coverage includes
Preventive services (annual wellness visits, cancer screenings)
Durable medical equipment (wheelchairs, oxygen equipment)
Mental health services (outpatient and partial hospitalization)
Coverage gaps and limitations exist
"Donut hole" in Part D prescription drug coverage
Limited coverage for long-term care and custodial services
Some services require prior authorization or have frequency limits (physical therapy sessions)
Medicare Funding
Primary Funding Sources
Medicare funding comes from multiple sources
Payroll taxes finance (HI) Trust Fund for Part A
2.9% tax shared equally between employers and employees
Additional 0.9% tax on high-income earners (over 200,000individual/250,000 couple)
General revenue from federal budget supports Supplementary (SMI) Trust Fund for Parts B and D
Beneficiary premiums contribute to Parts B and D funding
Standard Part B premium in 2023 $164.90 per month
Part D premiums vary by plan, averaging $31.50 per month in 2023
Interest earned on trust fund balances provides additional revenue