What Is Medicare?
Understanding the Foundation of Your Health Care in Retirement
Medicare is the federal health insurance program of the United States government, established in 1965 under President Lyndon B. Johnson. It was created to ensure that older Americans and individuals with qualifying conditions have access to affordable, quality health care — regardless of their income or employment status.
Today Medicare serves more than 65 million Americans and remains one of the most significant and far-reaching health care programs in the nation.
Who Is Eligible for Medicare?
Medicare is available to the following individuals:
● Adults aged 65 and older who are United States citizens or permanent legal residents who have lived in the country for at least five consecutive years
● Individuals under 65 who have received Social Security Disability Insurance — known as SSDI — for 24 months or longer
● Individuals of any age diagnosed with End Stage Renal Disease — permanent kidney failure requiring dialysis or a transplant
● Individuals of any age diagnosed with Amyotrophic Lateral Sclerosis — also known as ALS or Lou Gehrig’s Disease
Think of it this way — purchasing whole life insurance is similar to buying a home rather than renting one. Your monthly cost may be higher than a term policy, but with every payment you make, you are building equity in your policy through growing cash value.
How Is Medicare Funded?
Medicare is funded through several sources:
● Payroll taxes — Workers and employers each contribute 1.45% of earnings toward Medicare through the Federal Insurance Contributions Act — known as FICA. Self-employed individuals pay the full 2.9%.
● Monthly premiums — Beneficiaries pay monthly premiums for certain parts of Medicare, particularly Part B and Part D
● General federal revenue — A portion of Medicare funding comes directly from the federal government
● Cost sharing — Deductibles, copayments, and coinsurance paid by beneficiaries also contribute to program funding
It is important to note that any outstanding loan balance not repaid will be deducted from the death benefit paid to your beneficiaries. Loans also accrue interest, so it is wise to manage borrowing carefully.
What Does Medicare Cover?
Medicare provides coverage across four distinct areas — known as the four parts of Medicare:
Medicare Part
Coverage Area
Part A
Part B
Part C
Part D
Hospital and inpatient care
Doctor visits and outpatient services
Medicare Advantage – bundled private plans
Prescription drug coverage
Each part addresses a different aspect of your health care needs, and together they form a comprehensive framework of coverage for eligible individuals.
What Medicare Does Not Cover
It is equally important to understand what original Medicare — Parts A and B — does not cover. Common exclusions include:
● Long term care — Extended nursing home or custodial care
● Dental care — Routine dental exams, cleanings, and procedures
● Vision care — Routine eye exams and eyeglasses
● Hearing aids — Hearing devices and related fittings
● Cosmetic procedures — Elective or aesthetic treatments
● Acupuncture — With limited exceptions
● Most care received outside the United States
Many of these gaps can be addressed through Medicare Advantage plans or Medicare Supplement Insurance also known as Medigap which we will cover in detail in the pages that follow.
Original Medicare vs. Medicare Advantage
When you become eligible for Medicare, you will have a fundamental choice to make about how you receive your coverage:
Original Medicare — Parts A and B administered directly by the federal government, with the option to add a standalone Part D drug plan and a Medigap supplement policy.
Medicare Advantage — Part C plans offered by private insurance companies approved by Medicare, which bundle Parts A, B, and usually D into a single comprehensive plan — often with additional benefits such as dental, vision, and hearing coverage.
We will explore both options in detail throughout this section to help you determine which approach best fits your needs.
Key Medicare Terms to Know
Before exploring each part of Medicare in detail, it is helpful to familiarize yourself with a few essential terms:
● Premium — The monthly amount you pay for your Medicare coverage
● Deductible — The amount you pay out of pocket before your coverage begins
● Copayment — A fixed dollar amount you pay for a specific service
● Coinsurance — A percentage of the cost you pay after meeting your deductible
● Formulary — The list of prescription drugs covered by a Part D plan
● Network — The group of doctors, hospitals, and providers that accept your plan
● Enrollment Period — The specific window of time during which you can sign up for Medicare
Ready to Take the Next Step?
Understanding Medicare starts with having the right information — and the right advisor by your side. At JMomentum Consulting, we are committed to helping you understand every aspect of Medicare so you can make informed, confident decisions about your health care coverage.