Just the Essentials...
Medicare is a federal program.
Originally, the U.S. Congress authorized Medicare in 1965.
Medicare funds come from federal taxes, consumer payments, and premiums.
The Centers for Medicare and Medicaid Services (CMS) administers Medicare.
Unlike Medicare, Medicaid is a state-run program with partial federal funding.
Medicare is the federal health services program for American seniors and those of any age with disabilities. Divided into several focused parts, Medicare provides preventive and diagnostic medical care, prescription drugs, and hospital stays.
In short, Medicare provides the same nationwide coverage regardless of which state you live in. The doctors, hospitals, and other healthcare providers under Medicare participate in a network that spans all states and U.S. territories.
When it comes to Original Medicare, the federal government bears the responsibility of handling health insurance claims. Because Medicare pays claims on a rule of medical necessity, it covers services for the prevention, diagnosis and treatment of illness or injury to eligible Americans.
Within each state, however, Medicare health plans like Medicare Advantage offer benefits using local providers according to your county or zip code. To find the right plan for you, enter your zip for free quotes in your area.
Medicare: The Federal Health Insurance in Parts
Medicare began as an amendment to the Social Security Act. The Original Medicare program encompassed the Medical Insurance of Part B and the Hospital coverage of Part A.
Listed below are the major parts of Medicare:
- Original Medicare Part A – Inpatient Hospital Insurance.
- Original Medicare Part B – Medical Insurance.
- Medicare Part C – Medicare Advantage that include at least the coverage of Parts A and B, and many include Part D as well.
- Medicare Part D – Prescription Drug coverage.
- Medigap supplemental policies – Gap insurance which helps pay out-of-pocket costs for Medicare-covered services.
Beginning with Federal Original Medicare
Medicare Parts A and Part B comprise the Original Medicare program. Later, Congress added the Prescription Drug benefit called Part D and the privately managed health insurance called Part C, or Medicare Advantage.
The Original Medicare is a government run program for medical services and hospital care. Users arefree to select among doctors and hospitals that agree to accept Medicare assignment. In that arrangement, Medicare providers receive agreed-upon payment amounts for specific medical services.
On the consumer side, patients must pay the difference directly to the provider, which is usually 20% of the Medicare-approved fee charged for a particular service.
Further, Original Medicare operates without specialist referrals. Rather, users choose which medical providers they see as long as the provider accepts Medicare.
Original Medicare Uses Regional Administrators with Federal Contracts
Without a doubt, the massive undertaking to insure a diverse national population requires technical expertise and consistency. Essentially, the Centers for Medicare and Medicaid Services (CMS) hires several private contractors to process health claims and maintain records for large areas of the U.S.
Across each of 12 general regions, these government-contracted administrators work closely with medical providers to make sure payments are made on time for services rendered.
The Centers for Medicare and Medicaidapproves plans presented by private insurers for Medicare Advantage. These plans must cover at least the benefits of Original Medicare, but they can do more in various ways. The insurers can devise methods for saving costs in some areas and reducing out of pocket expenses in another area.
Given that private insurers have established certain efficiencies when it comes to processing health claims, the federal government leverages these cost-saving operations with Medicare Advantage. As opposed to massive regional organizations to handle the workload, the private insurance carriers more effectively divide and conquer. Moreover, these private entities could offer benefits beyond the rules of medical necessity under Original Medicare.
For the first time, benefits like dental, vision, and hearing could accompany Medicare coverage through Part C.
In effect, a competitive market of Medicare Advantage plans began when Congress authorized Medicare Part C in the 1990’s.
Types of Managed Care in Medicare Advantage
Overall, the private insurance plans in Medicare Advantage offer a wide variety of choices for consumers. Beyond the choice between Original Medicare and Medicare Advantage, another level of choice is the network type.
A network type that meets the needs of one person may not work as conveniently for another. In short, a network recruits certain local providers like doctors, hospitals, and pharmacies to participate in a plan.
The use of networks means a difference in the price for services depending on whether a provider participates. In some networks, going out of network means the patient pays 100% of the costs.
The below-itemized managed care types affect consumer choice in Medicare Advantage plans.
- HMO is the health maintenance organization. They feature prevention and wellness programs in addition to a strict local network for medical services. HMOs prohibit use of doctors and other providers outside of that local network.
- PPO is the preferred provider organization. These networks do not restrict users to in-network resources; however, outside resources typically cost more out-of-pocket. Distinctly, PPOs do not require referrals for specialists, nor does it require a primary care physician to oversee a patient’s care.
- EPOis the exclusive provider network. It does not use outside resources. The EPO offers low prices to its members and full use of the network resources. The EPO does not use a primary care physician and does not require referrals.
- HMO-POS is an HMO with a flexible option for outside services. This HMO type has a primary care doctor and requires referrals for using network services. The point of service (POS) option is that the primary care physician can make referrals to outside providers. The insurance will cover the outside referral but leaves more cost sharing to the patient than with network resources. Further, a provider
- PFFSis the private fee for services organization. These networks can provide significant costs savings. They do not use outside resources, and all costs are negotiated terms. The consumer gets the costs sharing they wish and decide when to go to outside sources and pay the fees out-of-pocket.
States Give Requirements for Medigap Variety
Although Medicare is a federal program, states help regulate Medigap by licensing companies that offer Medigap insurance companies.In other words, states require that private insurance carriers offer a wide variety of Medigap insurance options.
Law standardizes each type of Medigap policy to cover specific Medicare-approved services in specific amounts, meaning that all Medigap plans of the same type only differ in terms of premium charged by the private carrier.
States mandate the availability of different Medigap options to account for wide medical needs and cost preferences, regardless of a person’s location.
The private companies that offer Medicare Supplements must offer an approved combination of plans. States require a combination of comprehensive plans along with any limited option plans.
Despite being subject to state rules for types of Medigap plans, the insurance companies offering the policies can assess a person’s medical history to determine whether to accept or reject applications.
Medicare Supplement requires Medicare Parts A, and B. Acceptance is guaranteed during open enrollments and the initial enrollment period.
States Run Medicaid Programs
Unlike Original Medicare, which is a federal health insurance program, Medicaid programs are specific to each state. The federal government sets the bar for the quality of care that states use when providing Medicaid assistance. In effect, each state program combines federal funds and state resources to meet federal quality standards.
Regardless of which state a person lives in, Medicare eligibility is based on U.S. citizenship, age, or disability status. On the other hand, Medicaid program eligibility is unique to each state, based on household income.
States set their own qualifications for their Medicaid program, sometimes putting them at odds with federal policy. The states formulate an upper limit on income to qualify for Medicaid which vary based on demographics taken from the individual states.
The U.S. Congress authorized an Expansion of Medicaid to give medical support those between the federal poverty line and about 138 percent of poverty income. In effect, state Medicaid programs further reduced the numbers of uninsured residents. This helped relieve the weight of unpaid bills that burden providers like hospitals and clinics. Nonetheless, some states turned down expansion of Medicaid coverageto their vulnerable residents.
Additionally, states administer the Children’s Health Insurance Program, offering Medicaid to minors. State and federal funds ensure a minimum of medical services for children and teens in low-income households.
Providing health and dental coverage, these programs are an integral part of the social safety net that protects the most vulnerable members of society.
Medicare is a Federal Program with State Cooperation
All-in-all, federal taxes, federal administration, and federal standards govern the largest healthcare system in the country.
Our free comparison tool gives you a convenient way to find the private plans offered through Medicare Advantage, Part D prescription policies, and comprehensive care in Medicare Advantage.
Get started finding your best Medicare Advantage options by entering your zip code below!
Medicare, unlike Medi-Cal, is a national health care program that's funded and operated by the federal government.Is Medicare based on state or federal? ›
Medicare is federal health insurance for people 65 or older, and some people under 65 with certain disabilities or conditions. A federal agency called the Centers for Medicare & Medicaid Services runs Medicare. Because it's a federal program, Medicare has set standards for costs and coverage.Is Medicare a federal state program? ›
Medicare is the federal government program that provides health care coverage (health insurance) if you are 65+, under 65 and receiving Social Security Disability Insurance (SSDI) for a certain amount of time, or under 65 and with End-Stage Renal Disease (ESRD).Do states have Medicare programs? ›
Original Medicare (Part A and Part B) is a federal program so your coverage, costs and benefits will not be different from state to state. Medicare Advantage, Medicare Part D and Medigap plans are available through private insurers. These optional Medicare plans are regulated by each state and tend to vary.Do states have control over Medicare? ›
Although Medicare is a federal program, states help regulate Medigap by licensing companies that offer Medigap insurance companies. In other words, states require that private insurance carriers offer a wide variety of Medigap insurance options.Is Social Security and Medicare considered federal? ›
Taxes under the Federal Insurance Contributions Act (FICA) are composed of the old-age, survivors, and disability insurance taxes, also known as social security taxes, and the hospital insurance tax, also known as Medicare taxes.What states do not have Medicare? ›
As of the time of writing, only 12 states have not done so: Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, and Wyoming. Eleven of the 13 states with the highest uninsurance rates nationwide have not expanded Medicaid.What federal agency runs Medicare? ›
The Centers for Medicare & Medicaid Services, CMS, is part of the Department of Health and Human Services (HHS).Is healthcare a federal program? ›
In the US, the six major government programs are Medicare, Medicaid, the State Children's Health Insurance Program (SCHIP), the Department of Defense TRICARE and TRICARE for Life programs (DOD TRICARE), the Veterans Health Administration (VHA) program, and the Indian Health Service (IHS) program.What happens to my federal health insurance when I turn 65? ›
Your FEHB coverage will continue whether or not you enroll in Medicare. If you can get premium-free Part A coverage, we advise you to enroll in it. Most Federal employees and annuitants are entitled to Medicare Part A at age 65 without cost.
Top U.S. states by number of Medicare beneficiaries 2021
In 2021, California reported some 6.49 million Medicare beneficiaries and therefore was the U.S. state with the highest number of beneficiaries.
Key Takeaways. Original Medicare (Parts A and B) covers hospital care and doctor visits in all 50 U.S. states and its territories, as long as providers accept Medicare. Certain Medicare Advantage (MA) plans also provide state-to-state coverage, but some limit coverage to a defined service area.What is the best state to live in if you're on Medicare? ›
|State||Average Monthly Medicare Advantage Premium||Percent of Plans Rated 4 Stars or Higher|
Cost: If you have Part B, you pay a Part B premium each month. Most people will pay the standard premium amount. Social Security will contact some people who have to pay more depending on their income. If you don't sign up for Part B when you are first eligible, you may have to pay a late enrollment penalty.Why am I paying for Medicare? ›
Like Social Security tax, Medicare tax is withheld from an employee's paycheck or paid as a self-employment tax. Medicare tax pays for Part A of the Medicare program, which includes hospital insurance for individuals age 65 or older and people who have certain disabilities or medical conditions.Do the states control Medicaid? ›
Medicaid is administered by states within broad federal rules and jointly funded by states and the federal government through a federal matching program with no cap.Does Medicare work the same in every state? ›
Medicare Part A and Medicare Part B together are known as “original Medicare.” Original Medicare has a set standard for costs and coverage nationwide. That means your coverage will be the same no matter what state you live in, and you can use it in any state you visit.Does it matter what state you live in for Medicare? ›
En español | You can move anywhere within the United States without losing original Medicare coverage, as long as your new health care facility, doctor or other provider accepts Medicare.Are Medicare premiums the same in every state? ›
Part A and Part B of Medicare have standardized costs that are the same across every state. Most people qualify for premium-free Part A.How much do most seniors pay for Medicare? ›
Although nearly everyone will get free Medicare Part A, the total cost for all components of Medicare will typically be between $165 and $370 per month.