What is Medicare
Medicare is the federal healthcare program for adults aged over 65, adults with disabilities, and people with end stage renal disease. The program provides coverage for inpatient and outpatient services, and prescription drugs.
Medicare gets money from two trust funds: the hospital insurance (HI) trust fund and the supplementary medical insurance (SMI) trust fund.
The trust funds get money from payroll taxes, as allowed by the Federal Insurance Contributions Act (FICA) enacted in 1935. Also, Medicare taxes at a rate of 2.9% are taken from people who are self-employed. Other trust funding money includes premiums and income from investments. 
Taxes paid by employers, employees, and self-employed workers provide money for the HI trust fund, established in 1965. The trust fund also garners the interest earned on its investments, income taxes from some Social Security benefits, and income from Medicare Part A premiums.
The HI trust fund covers the services provided through Medicare Part A, which pays for inpatient hospital stays and care, including nursing care, meals, and a semi-private room. Part A also covers skilled nursing care, hospice services, and home health.
The HI trust fund also pays for Medicare administrative costs, including tax collection, and fighting fraud. The HI trust fund’s expenditures in 2019 totaled $328.2 billion.
Supplementary medical insurance trust fund
The SMI trust fund has two parts, namely Part B and Part D, funded by the premiums paid for each part. In addition, it receives funds authorized by Congress, and the interest from trust fund investments.
The SMI trust fund covers the services offered by Medicare Part B, a portion of Part D, and some of the Medicare program’s administrative costs.
Medicare Part B includes outpatient services, such as doctor’s visits, lab tests, certain cancer screenings and preventative care, and ambulance transport.
Medicare Part D provides coverage for prescription drugs. It gets funding from the SMI trust fund, and from premiums.
What Part A covers
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| If you’re in a Medicare Advantage Plan or other Medicare plan, your plan may have different rules. But your plan must give you at least the same coverage as Original Medicare. Some services may only be covered in certain facilities or for patients with certain conditions. |
In general, Part A covers:
- Inpatient care in a hospital
- Skilled nursing facility care
- Nursing home care (inpatient care in a skilled nursing facility that’s not custodial or long-term care)
- Hospice care
- Home health care
2 ways to find out if Medicare covers what you need
- Talk to your doctor or other health care provider about why you need certain services or supplies. Ask if Medicare will cover them. You may need something that’s usually covered but your provider thinks that Medicare won’t cover it in your situation. If so, you’ll have to read and sign a notice. The notice says that you may have to pay for the item, service, or supply.
- Find out if Medicare covers your item, service, or supply.
Medicare coverage is based on 3 main factors
- Federal and state laws.
- National coverage decisions made by Medicare about whether something is covered.
- Local coverage decisions made by companies in each state that process claims for Medicare. These companies decide whether something is medically necessary and should be covered in their area.
How Do Medicare Advantage Carriers Make Money?
provide prescription drug coverage. Plans are paid for by Medicare through a bidding procedure. Bids are submitted depending on the costs for each member for services.Bids that meet all qualifications receive approval. Benchmark amounts vary depending on the region. Benchmark amounts can range from 95% to 115% of Medicare costs. If bids come in higher than benchmark amounts, the enrollees must pay the cost difference in a monthly premium.
When bids are lower than benchmark amounts, Medicare and the health plan provide a rebate to enrollees after splitting the difference in cost. A new bonus system works to compensate for health plans that have high-quality ratings. Advantage plans that have four or more stars receive bonus payments for their quality ratings.
Get Started with Social Security
