Background & History

In 1966, Medicare was developed and introduced as a national social insurance program which was to be provided by the U.S. federal government. Medicare currently employs the services of approximately 30 private insurance companies across the United States. Medicare is designed to provide health insurance for citizens aged 65 and above who have worked and paid into the system. It also provides health insurance to younger people with disabilities, and those suffering from end stage kidney disease who require constant dialysis, or who are waiting for a kidney transplant.

Since its conception, Medicare has expanded to include benefits for speech and language, physical, and chiropractic therapy. Originally, Medicare was only to be provided to those over the age of 65, but eligibility has since been opened to younger people who have permanent disabilities and receive Social Security Disability Insurance (SSDI) payments and those who are suffering from end-stage renal disease (ESRD).

It is important to note that Medicare will never fully cover all of a recipient’s costs and many costs are not covered at all. The program contains premiums, deductibles and coinsurance, which the covered individual must pay out of their own earnings or funds.

Financing for Medicare

Medicare has several sources of financing. Part A is largely funded by revenue from a payroll tax levied on employers and workers, whilst Parts B and D are partially funded by those who opt in to receive the benefits of these parts, and general fund revenue. A self-employed individual must pay the entire tax on self-employed net earnings because technically they are both employee and employer. In 2013 there was an increase in taxation on working citizens in order to pay part of the cost of subsidies mandated by the Patient Protection and Affordable Care Act (PPACA), also known as the Affordable Care Act (ACA) or ObamaCare. PPACA was introduced by President Obama in 2010, and was the first significant change in healthcare provision in America since Medicare and Medicaid came into fruition in the 1960s.