A Primer on Medicare: Key Facts About the Medicare Program and the People it Covers

July 30, 2015 marks the 50^th anniversary of the date in 1965 that President Lyndon Johnson signed the law establishing the Medicare program. Medicare is a social insurance program that helps to provide health and financial security for people ages 65 and older and younger people with permanent disabilities. Prior to 1965, roughly half of all seniors lacked medical insurance; today, virtually all seniors have health insurance under Medicare. Since Medicare’s beginning, a number of changes have been made to expand benefits, revise the way Medicare pays providers, modify beneficiary out-of-pocket costs for Medicare-covered services, improve access and coverage for low-income individuals, expand the role of private plans in providing Medicare-covered benefits, strengthen quality, and address the growth in program spending.

Today, Medicare provides health insurance coverage to more than 55 million people: 46.3 million people ages 65 and older and 9 million people with permanent disabilities under age 65.¹ The program helps to pay for many vital health care services, including hospitalizations, physician visits, and prescription drugs, along with post-acute care, skilled nursing facility, home health care, hospice, and preventive services. People who are working contribute payroll taxes to Medicare and most people become eligible for Medicare when they reach age 65, regardless of income or health status.

Comprising 14 percent of the federal budget in 2014 and just over one-fifth of total personal health expenditures in 2013, Medicare spending has slowed in recent years and is expected to grow at a slower rate than private insurance on a per person basis over the next decade. At the same time, Medicare is often part of discussions about how to moderate the growth of both federal spending and health care spending in the U.S. With the challenges of providing increasingly expensive medical care to an aging population and sustaining the program for the future, Medicare is likely to remain prominent on the federal policymaking agenda in the years ahead. As policymakers consider potential changes to Medicare, the effects of such changes on total health care expenditures, Medicare spending, and beneficiaries’ access to quality care and their out-of-pocket costs will be important considerations.