“Medicare is a federal insurance program that pays for covered health care services of most individuals aged 65 and older and certain disabled persons. In calendar year 2022, the program is expected to cover about 65 million persons at a total cost of $933 billion. Most individuals (or their spouses) aged 65 and older who have worked in covered employment and paid Medicare payroll taxes for 40 quarters receive premium-free Medicare Part A (Hospital Insurance). Those entitled to Medicare Part A (regardless of whether they are eligible for premium-free Part A) have the option of enrolling in Part B, which covers such things as physician and outpatient services and medical equipment.

“Beneficiaries have a seven-month initial enrollment period, and those who enroll in Part B after this initial enrollment period and/or reenroll after a termination of coverage may be subject to a late-enrollment penalty. This penalty is equal to a 10% surcharge for each 12 months of delay in enrollment and/or reenrollment. Under certain conditions, some beneficiaries are exempt from the late-enrollment penalty; these exempt beneficiaries include working individuals (and their spouses) with group coverage through their current employment, some international volunteers, and those granted “equitable relief.”

“Whereas Part A is financed primarily by payroll taxes paid by current workers, Part B is financed through a combination of beneficiary premiums and federal general revenues. The standard Part B premiums are set to cover 25% of projected average per capita Part B program costs for the aged, with federal general revenues accounting for the remaining amount. In general, if projected Part B costs increase or decrease, the premium rises or falls proportionately. However, some Part B enrollees are protected by a provision in the Social Security Act (the hold-harmless provision) that prevents their Medicare Part B premiums from increasing more than the annual increase in their Social Security benefit payments. This protection does not apply to four main groups of beneficiaries: low-income beneficiaries whose Part B premiums are paid by the Medicaid program; high-income beneficiaries who are subject to income-related Part B premiums; those whose Medicare premiums are not deducted from Social Security benefits; and new Medicare and Social Security enrollees.

“Most Part B participants must pay monthly premiums, which do not vary with a beneficiary’s age, health status, or place of residence. However, since 2007, higher-income enrollees pay higher premiums to cover a higher percentage of Part B costs (“income-related monthly adjustment amounts” (IRMAA)). Additionally, certain low-income beneficiaries may qualify for Medicare cost-sharing and/or premium assistance from Medicaid through a Medicare Savings Program. The premiums of those receiving benefits through Social Security are deducted from their monthly payments.”

Source: Patricia A. Davis, Medicare Part B: Enrollment and Premiums, R40082, Congressional Research Service, May 19, 2022.

“Medicare spending accounted for 21 percent of total national health care expenditures and reached $900.8 billion in 2021. In total, Medicare spending (for the fee-for-service program and Medicare private plans combined) grew 8.4 percent in 2021, increasing from a rate of 3.6 percent in 2020 (exhibit 3). Medicare fee-for-service expenditures represented 54 percent of total Medicare spending in 2021 and grew 3.9 percent after a decline of 4.1 percent in 2020, whereas Medicare private plan spending increased 14.1 percent in 2021—a continued strong rate of growth compared with a 15.6 percent increase in 2020 (data not shown).

“Overall Medicare enrollment increased 1.7 percent in 2021, which was a slightly slower rate than the increase of 2.1 percent in 2020 (exhibit 6). Medicare fee-for-service enrollment declined 3.8 percent in 2021 (falling for the third year in a row) after decreasing 2.2 percent in 2020, whereasMedicare private plan enrollment continued to experience robust growth, with the number of enrollees increasing 10.0 percent in 2021 after growth of 9.5 percent in 2020 (data not shown). Per enrollee Medicare spending increased 6.6 percent in 2021, which was a faster rate of growth than in 2020, when spending increased 1.5 percent (exhibit 6), with fee-for-service per enrollee spending increasing 8.0 percent (compared with -2.0 percent in 2020) and private plan per enrollee spending increasing 3.7 percent (compared with 5.6 percent in 2020) (data not shown).

“Medicare spending for personal health care, which reflects spending for medical goods and services and represents 93 percent of total Medicare expenditures, increased 10.6 percent in 2021 compared with growth of 1.7 percent in 2020 (data not shown). This faster rate was driven by an acceleration in spending growth for hospital care (from 0.7 percent in 2020 to 9.2 percent in 2021), as well as a turnaround in spending growth for physician and clinical services (from -0.1 percent in 2020 to 14.4 percent in 2021) (data not shown). COVID-19 had a significant impact on the use of inpatient and outpatient hospital services, beginning in 2020, as non-COVID-19-related care was forgone or deferred.⁷ In 2021 growth in the use and intensity of Medicare hospital services began to increase.⁷ As was the case with hospital care, use of physician and clinical services declined in 2020 before increasing in 2021.⁷ In addition, the physician fee schedule payment update factor, which was 0.0 percent in 2020, increased to 3.75 percent in 2021.⁷“

According to the federal Center for Medicare & Medicaid Services:

“Medicare is a health insurance program for:

• “People age 65 or older.
• “People under age 65 with certain disabilities.
• “People of all ages with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant).

“Medicare has different parts that help cover specific services:

“Medicare Part A (Hospital Insurance) – Part A helps cover inpatient care in hospitals, including critical access hospitals, and skilled nursing facilities (not custodial or long-term care). It also helps cover hospice care and some home health care. Beneficiaries must meet certain conditions to get these benefits. Most people don’t pay a premium for Part A because they or a spouse already paid for it through their payroll taxes while working.

“Medicare Part B (Medical Insurance) – Part B helps cover doctors’ services and outpatient care. It also covers some other medical services that Part A doesn’t cover, such as some of the services of physical and occupational therapists, and some home health care. Part B helps pay for these covered services and supplies when they are medically necessary. Most people pay a monthly premium for Part B.

“Medicare Part D (Prescription Drug Coverage) – Medicare prescription drug coverage is available to everyone with Medicare. To get Medicare prescription drug coverage, people must join a plan approved by Medicare that offers Medicare drug coverage. Most people pay a monthly premium for Part D.”

Source: Medicare Program – General Information. Center for Medicare & Medicaid Services. Last accessed on Jan. 27, 2023.

Health Systems Facts is a project of the Real Reporting Foundation. We provide reliable statistics and other data from authoritative sources regarding health systems in the US and sixteen other nations.

Page last updated Jan. 27, 2023 by Doug McVay, Editor.