4 Parts of Medicare Benefits

Medicare is an insurance program for United States citizens aged 65 and older through the United States government. This program was created under the Social Security Act of 1965 by President Lyndon Johnson. To qualify for Medicare benefits, applicants must be at least 65 and have lived in the United States as a legal citizen for a minimum of five years. The applicant, or his or her spouse, must also have paid Medicare taxes for a minimum of ten years to the program.

If an applicant is under the age of 65, he or she must have either begun to receive benefits under the Social Security Act or have been disabled. Medicare benefits would then become effective after two years from first receiving a disability payment. Other criteria for receiving Medicare include those applicants who receive regular dialysis treatments or require a kidney transplant and those applicants that may receive Social Security disability insurance or suffer from Lou Gehrig's disease (or ALS).

Medicare benefits are paid for primarily through taxes. The Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act impose taxes on employers, through payroll (wages and salaries), to fund the insurance program. The taxes equal 2.9 percent of payroll to be paid to the Medicare program. Prior to 1993, there was a limit imposed through legislation on the amount of wages that could be taxed.

This cap has been disposed of since January 1, 1994. For Medicare benefits through employers, the employee and the employers split the difference of the 2.9 percent. Those who are self-employed have to provide the 2.9 percent tax from their total earnings. However, for income tax purposes, the 2.9 percent could be divided in half for the self-employed from funds set aside for income taxes.

Medicare benefits under this insurance program are divided into four parts - Hospital insurance, Medical insurance, Advantage plans, and Prescription drug plans.

Hospital insurance, or Part A of the Medicare program

This covers the costs of a participant's overnight hospital stays or stays in a nursing facilityskilled nursing care Medical insurance, or Part B of the Medicare program, assists in paying for outpatient fees and some services not covered by Medicare Part A. Part B covers lab tests, vaccinations, dialysis, and the cost of medical equipment, e.g. wheelchairs, canes, and prosthetics.

Advantage plans, or Part C of the Medicare program

These are the plans that give participants the option to incorporate other health insurance plans into their Medicare benefits. This was made possible by the Balanced Budget Act of 1997 and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

Prescription drug plans, or Part D of the Medicare program

These are the most recent addition to the government provided insurance program. Beginning in 2006, participants that receive benefits from Parts A and B of the Medicare program may receive benefits under Part D. These plans can be customized to choose which drugs will be covered and may exclude certain drugs. Drugs that Part D does not cover are cough suppressants, barbiturates, and benzodiazepines.