Medicare Coverage in the United States
In 1965, President Lyndon B. Johnson signed into law the first major public health care program funded by the United States of America for its citizens. President Johnson signed the Social Security Act of 1965 nearly 45 years ago as an amendment to the Social Security program in order to provide health insurance for citizens over 65 years old. Nearly a half century later, the program is still running strong and providing valuable health care to senior citizens along with people under the age of 65 who have certain disabilities and special needs.
Several government agencies must work together to both administer the Medicare program and oversee the tax process that funds the program. The Centers for Medicare and Medicaid Services (CMS), operating within the Department of Health and Human Services directly administers the Medicare program for the government. The responsibility of determining eligibility for Medicare and processing premium payments falls to the Social Security Administration. Other governmental agencies like the Department of Labor and Department of the Treasury administer the insurance reform provisions provided in the 1996 Health Insurance Portability and Accountability Act.
The Medicare system is funded by every employed American in the country. The Federal Insurance Contributions Act and Self-Employment Contributions Act of 1954 provided the guidelines for taxing the income of American citizens to pay for Medicare. A total of 2.9% of wages, salaries, and other compensations to employees are paid in taxes to fund the program. Of that, 1.45% is taken out of the employees wage and the employer makes a matching contribution of 1.45%. Self-employed individuals must pay the full 2.9% tax themselves out of their net income.
Generally speaking, eligibility for Medicare applies to any individual 65 years of age or more who has been a legal U.S. resident for at least 5 years. Not everyone over the age of 65 is eligible for Medicare coverage however; individuals who have not paid Medicare taxes for a minimum of 10 years must pay a monthly premium to be enrolled in the program.
Medicare Part A premiums are waived under the following circumstances:
• Individual is 65 years or older and a U.S. resident and has paid Medicare taxes for at least 10 years
• Individual is 65 years or older and a legal permanent resident of the U.S. for at least 5 years and has paid Medicare taxes for at least 10 years
• Individual is under 65 years old, disabled, and receiving Social Security benefits or Railroad Retirement Board benefits for 24 months
• Individual is receiving continuing dialysis for end stage renal disease (ESRD) or requires a kidney transplant
• Individual is eligible for Social Security Disability Insurance and is suffering from amyotrophic lateral sclerosis (otherwise known as Lou Gehrig’s Disease or ALS).
What Is Medicare Supplement Insurance
A Medigap policy is health insurance sold by private insurance companies to fill the “gaps” in Original Medicare Plan coverage. Medigap policies help pay some of the health care costs that the Original Medicare Plan don’t cover. If you are in an Original Medicare Plan and have a Medigap policy, then Medicare and your Medigap policy will pay both their shares of covered health care costs.
Insurance companies can only sell you a “Modernized” Medigap policy. These Medigap policies must all have specific benefits so you can compare them easily.
You may be able to choose up to 10 different "Modernized" Medigap policies (Medigap Plans A through N). Medigap policies must follow Federal and State laws. These laws protect you. A Medigap policy must be clearly identified on the cover as “Medicare Supplement Insurance.” Each plan, A through N, has a different set of basic and extra benefits.
It’s important to compare Medigap policies because costs can vary. The benefits in any Medigap Plan A through N are the same for any insurance company. Each insurance company decides which Medigap policies it wants to sell.
Generally, when you buy a Medigap policy you must have Medicare Part A and Part B. You will have to pay the monthly Medicare Part B premium. In addition, you will have to pay a premium to the Medigap insurance company.
You and your spouse must each buy separate Medigap policies. Your Medigap policy won’t cover any health care costs for your spouse.
For additional information on Medigap policies, including why you would want to buy a Medigap policy and information about what Medigap policies cover, please read this publication, Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare.
What Are My Plan Options If I Have Medicare? Click Here to view the different options that you have.