Bijen Patel

What is Medicare? Key Points for Actuaries

Bijen Patel -

Medicare is a federal government health insurance program for elder people, and some disabled individuals. Unlike Medicaid, which is jointly-funded by the state and federal government, Medicare is solely funded by the federal government. Medicare consists of four different parts: Part A, Part B, Part C, and Part D.

Medicare Eligibility

Elder people are eligible for Medicare by meeting all of the following criteria:

  • Age of 65 or older
  • US citizen or permanent resident for at least 5 years
  • Paid Medicare taxes for at least 10 years

Disabled people are eligible for Medicare by meeting one of the following criteria:

  • Permanently disabled and received Social Security Disability Insurance for at least the previous 2 years
  • Have end-stage renal disease and need continuous dialysis or a kidney transplant
  • Receive Social Security disability benefits for Lou Gehrig’s disease

Parts of Medicare

Part A

Medicare Part A is the component that covers inpatient care, skilled nursing facilities, home healthcare, and hospice care. Most individuals who qualify for Medicare receive Part A for free through having paid Medicare taxes for a certain minimum amount of time while they were working. Individuals who qualify for Medicare, but do not qualify for free Part A coverage, are allowed to purchase Part A for a monthly premium. The amount of the monthly premium depends on how long the individual paid Medicare taxes. Although most individuals receive Part A coverage for free, the services are still subject to a deductible, copays, and coinsurance.

Part B

Medicare Part B is the component that covers outpatient care, physician services, and preventive services. Unlike Part A, Part B is not free. The monthly premium ranges from $135 or higher, depending on an individual’s level of income. Part B is also subject to a deductible, copays, and coinsurance.

Part C

Medicare Part C is also known as Medicare Advantage (MA). MA gives people the option to buy a private health plan from a Medicare-approved health insurance company. These private MA plans offer the same benefits as Part A and Part B, plus extra benefits. People buy MA plans to ensure that they are covered for services not covered by Part A and Part B. The extra benefits may include vision, hearing, dental, health or wellness programs, and more. The monthly premium for the Part A and Part B coverage remains the same. The additional monthly premium for the extra benefits varies by plan and even by insurance company. MA plans are still subject to a deductible, copays, and coinsurance.

Part D

Medicare Part D is an optional component that covers prescription drugs. Similarly to Part C, Part D is also purchased through a health insurance company. The monthly premium varies by plan and even by insurance company. Part D is also subject to a deductible, copays, and coinsurance.