Is Medicare a Federal or State Government Program? | MHP

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Is Medicare a Federal or State Government Program?

Is Medicare a Federal or State Government Program?Medicare is a United States federal government program managed by the Centers for Medicare & Medicaid Services. People eligible include individuals 65 and older and those with disabilities or end-stage renal disease. This page explains its history and processes.

How Did It Start?

President Lyndon B. Johnson signed the law that led to its creation in 1965. The initial program included two parts: Part A for hospital insurance and Part B—which is optional—for medical insurance. Enrollment began in 1966 for Americans age 65 and older and covered around 19 million people in the first year.

In 1972, the Nixon administration amended it to extend coverage to people with disabilities or end-stage renal disease. In later years, the federal government added more coverage options with a few administrative changes along the way:

By 2015, it covered more than 55 million Americans. The program provides crucial health care coverage to beneficiaries across the nation.

How Does It Work?

The Centers for Medicare & Medicaid Services is a branch of the federal agency called the Department of Health and Human Services, which is overseen by the president. The government contracts with private insurance companies to administer the program.

Funding comes primarily from payroll taxes paid by American workers and employer businesses. It is partially funded by income taxes on Social Security benefits and other sources. One separate source of funding comprises funds authorized by Congress, premiums paid for Part B and Part D, and some other financial institutions.

Beneficiaries can sign up for Part A and Part B—“Original Medicare”—or they may choose to purchase an MA Plan, also called Part C, from private insurance companies. Individuals may also buy an MS Plan, also referred to as a Medigap Plan, to help pay for expenses not covered by Part A and Part B. Those who need coverage for medications can enroll in a Part D prescription drug plan or choose an MA Plan that includes coverage for medications.

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