Medicare is the primary health insurance policy for nearly all Americans ages 65 and older and people with long-term disabilities.

Traditional Medicare has two parts.

• Part A, Hospital Insurance, is paid for by payroll taxes and covers expenses from hospitals, skilled nursing facilities, hospice and home health care.
• Part B, Medical Insurance, covers physician and other medical costs and is voluntary. It is funded by beneficiary-paid monthly premiums, which are matched three-to-one by the federal government’s general revenues.

Medicare has two additional parts:

• Part C, typically referred to as the Medicare Advantage program, allows Medicare beneficiaries to enroll in private plans available where they live, including health maintenance organizations (HMOs), preferred provider organizations (PPOs) or private fee-for-service (PFFS) plans. Beneficiaries who choose a Medicare Advantage plan receive their benefits from the plan, not Medicare. The private plan, in turn, is paid by Medicare to provide benefits to those beneficiaries who select it. Part C is not separately financed.

Part D, the voluntary prescription drug program, was added by the Medicare Modernization Act of 2003 and became effective in January 2006. The benefit is provided only through private plans, either stand-alone prescription drug plans or through a Medicare Advantage plan. Part D is funded by beneficiary-paid monthly premiums, federal government general revenues and state payments with beneficiary premiums covering about 25 percent of the cost.

Medicare’s Financial Condition

Skyrocketing health care costs are affecting the cost of all health coverage, including Medicare. The financial challenges facing Medicare, however, are aggravated by the over payments to Medicare Advantage plans and the introduction of an arbitrary threshold for the portion of Medicare funding from federal government general revenues.

Medicare Part D: Bad Medicine

In November 2003, the Republican-controlled Congress passed a Medicare prescription drug bill with enormous gaps in coverage for Medicare’s 37 million seniors and 7 million people with disabilities, the bill did nothing to control drug prices and was written to benefit big drug companies, not consumers.

Find out more about Medicare and learn how you can get involved with the Alliance for Retired Americans here.