Medicare Primer

Patricia A. Davis, Coordinator
Specialist in Health Care Financing

Cliff Binder
Analyst in Health Care Financing

Jim Hahn
Specialist in Health Care Financing

Paulette C. Morgan
Specialist in Health Care Financing

Janemarie Mulvey
Specialist in Health Care Financing

Scott R. Talaga
Analyst in Health Care Financing

Sibyl Tilson
Specialist in Health Care Financing

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, which consists of four parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services.

Generally, individuals are eligible for Medicare if they or their spouse worked for at least 40 quarters in Medicare-covered employment, are 65 years old, and are a citizen or permanent resident of the United States. Individuals may also qualify for coverage if they are a younger person with a permanent disability, have End-Stage Renal disease (permanent kidney failure requiring dialysis or transplant), or have amyotrophic lateral sclerosis (ALS, Lou Gehrig’s disease). In addition, individuals with one or more specified lung diseases or types of cancer who lived for six months during a specified period prior to diagnosis in an area subject to a public health emergency declaration by the Environmental Protection Agency (EPA) as of June 17, 2009, are also deemed entitled to benefits under Part A and eligible to enroll in Part B.

In FY2012, the program will cover approximately 50 million persons (41 million aged and 9 million disabled) at a total cost of about $566 billion, accounting for approximately 3.5% of GDP. Medicare is an entitlement program, which means that it is required to pay for covered services provided to eligible persons so long as specific criteria are met.

Since 1965, the Medicare program has undergone considerable change. During the 111th Congress, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148) and the Health Care and Education Affordability Reconciliation Act of 2010 (the Reconciliation Act, or HCERA; P.L. 111-152) were signed into law. They made numerous changes to the Medicare program that modify provider reimbursements, provide incentives to increase the quality and efficiency of care, and enhance certain Medicare benefits.

However, in the absence of congressional action, the Medicare program will be unsustainable in the long run. The Hospital Insurance (Part A) trust fund has been estimated to become insolvent in 2024. And although the Supplementary Medical Insurance (Parts B and D) trust fund is financed in large part through federal general revenues and cannot become insolvent, Medicare spending growth will put increasing strains on Congress’s competing priorities.

The 112th Congress may continue to debate the recent changes to Medicare, and may also consider additional legislative action ranging from technical corrections to broader structural changes. Additionally, Congress may consider legislative action to address the 2013-2021 automatic Medicare spending reductions under the Budget Control Act of 2011 (BCA; P.L. 112- 25).


Date of Report: January 19, 2012
Number of Pages: 30
Order Number: R40425
Price: $29.95

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