Medicare is a federal health insurance program for people 65 years and older. Millions of
Baby Boomers enroll in the program each year and depend on it to cover medical expenses.
Medicare can be difficult to understand, causing new applicants unexpected and unwelcome confusion and stress. This article will outline the program in clear terms to help Baby Boomers understand exactly what Medicare is.
What is Medicare?
Established in 1965, Medicare is a U.S. health insurance system that covers most, if not all of the costs of medical care for people aged 65 and older. The program is funded through a 1.45% payroll tax you’ve been paying throughout your working years. Medicare is a benefit you have earned.
When you sign up for the program you are enrolled in “Original Medicare.” Original Medicare is defined as a “Fee For Service” health plan that is made up of two central pieces: Hospital Insurance (also known as Medicare Part A) and Medical Insurance (also known as Medicare Part B.) When you enroll in the program, you get Part A and Part B. If you want prescription drugs covered, you’ll need to enroll and pay separately for a Medicare Part D program. These programs are available through an insurance company or other private company approved by Medicare.
When you receive medical services, you will be required to pay a deductible. The remaining balance due for the services received is covered through the program but the amount paid will be limited to a Medicare-approved amount. If there is still a remaining balance due, you are responsible to pay it.
In reality, Medicare ends up covering approximately 50% of medical expenses incurred by those enrolled in the program. The remaining 50% of health care costs are generally covered by separate private insurance policies and/or through publicly available Part C or Part D Medicare health plans.