Medicare is the federal government's principal health care insurance program for people 65 years of age and over. In addition, the program covers people of any age who are permanently disabled or who have end-stage renal disease (people with kidney ailments that require dialysis or a kidney transplant). The Medicare program insures around 62 million Americans and spends close to $800 billion a year on their care. Medicare is an entitlement program, meaning it is not based on financial need.
Although Medicare was originally conceived as a program that would relieve older persons of the burden of paying for health care, Medicare beneficiaries now pay a greater percentage of their incomes for out-of-pocket health care expenses than they did before Medicare was enacted in 1965. In addition to paying a monthly premium, Medicare recipients are often required to pay a portion of the cost of the services they receive in the form of a deductible or co-insurance amounts. Deductibles, co-insurance amounts and premiums increase each January. In addition, there are many services and items, such as long-term unskilled nursing home or in-home care, that Medicare does not cover. To help with this cost-sharing and the items that Medicare does not cover, Medicare beneficiaries often purchase private insurance policies called "Medigap" policies.
For the most part, Medicare pays only for "acute" care -- care that the program's administrators view as reasonable and necessary to diagnose or treat an illness or injury. In other words, the program does not pay for most preventive care or unskilled care to treat chronic conditions.
Medicare consists of four major programs: Part A, which covers hospital stays; Part B, which covers physician fees; Part C, which permits Medicare beneficiaries to receive their medical care from among a number of delivery options; and Part D, which covers prescription medications.
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For more on the basics of Medicare, see Medicare's annually updated booklet, "Medicare & You."