Medicare Primer Page: 4 of 27
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Medicare is a federal insurance program that pays for covered health care services of qualified
beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act as a federal
entitlement program to provide health insurance to individuals 65 and older, and has been
expanded over the years to include permanently disabled individuals under 65. Medicare consists
of four distinct parts:
" Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled
nursing care, and home health and hospice care. The HI trust fund is mainly
funded by a dedicated payroll tax of 2.9% of earnings, shared equally between
employers and workers.
" Part B (Supplementary Medical Insurance, or SMI) covers physician services,
outpatient services, and some home health and preventive services. The SMI trust
fund is funded through beneficiary premiums (set at 25% of estimated program
costs for the aged) and general revenues (the remaining amount, approximately
" Part C (Medicare Advantage, or MA) is a private plan option for beneficiaries
that covers all Part A and B services, except hospice. Individuals choosing to
enroll in Part C must also enroll in Part B. Part C is funded through the HI and
SMI trust funds.
" Part D covers prescription drug benefits. Funding is included in the SMI trust
fund and is financed through beneficiary premiums (about 25.5%) and general
revenues (about 74.5%).
Medicare serves approximately one in seven Americans and virtually all of the population aged
65 and over. In 2010, the program will cover an estimated 47 million persons (39 million aged
and 8 million disabled). The Congressional Budget Office (CBO) estimates that total Medicare
spending in 2010 will be about $521 billion, accounting for approximately 3.6% of GDP. CBO
also estimates that federal Medicare spending (after deduction of beneficiary premiums and other
offsetting receipts) will be about $444 billion in 2010, accounting for over 15% of total federal
spending. Medicare is an entitlement program, which means that it is required to pay for all
covered services provided to eligible persons, so long as specific criteria are met. Spending under
the program (except for a portion of administrative costs) is considered mandatory spending (not
discretionary spending, which is subject to the appropriations process).
Having passed health reform legislation in March 2010, the remaining months of the 111th
Congress may be partly spent working on addressing Medicare physician payment issues and on
identifying and making any necessary technical fixes to the March legislation. The Committees of
jurisdiction for the entitlement (or benefits) portion of Medicare are the Senate Committee on
Finance, the House Committee on Ways and Means, and the House Committee on Energy and
Commerce. The House and Senate Committees on Appropriations have jurisdiction over the
discretionary spending used to administer and oversee the program.
Congressional Research Service
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Medicare Primer, report, July 1, 2010; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc819894/m1/4/?q=medicare: accessed April 23, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.