Medicare and Medicaid: Definitions & Functions

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  • 0:02 U.S. Healthcare
  • 0:23 Medicare: Definition…
  • 2:59 Medicaid: Definition…
  • 4:53 Lesson Summary
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Lesson Transcript
Instructor: Artem Cheprasov

Artem has a doctor of veterinary medicine degree.

This lesson will teach and define what Medicare and Medicaid are, what they are for, what they provide, and for whom they were established for. We'll also cover the four main parts of Medicare.


The U.S. healthcare system is so convoluted that many have argued the laws enforcing the system by politicians aren't even understood by the politicians themselves. There may be a point in there.

Since there is so much to know, we will narrow our focus to two very well-known programs, what they are and what they do.

Medicare: Definition and Function

Medicare is a federally funded health insurance program for people 65 years of age or older. While commonly associated with the elderly, Medicare does provide health benefits for people of any age that have certain disabilities or if someone has end-stage kidney failure.

Medicare was officially established in 1965, is administered by the Centers for Medicare & Medicaid Services (a part of the U.S. Department of Health and Human Services), and much of the funding for this social program comes from federal payroll taxes. The Centers for Medicare & Medicaid Services used to be known as the Health Care Financing Administration.

Medicaid was established in order to help older individuals have access to healthcare that may otherwise have been denied to them through private health insurance avenues.

There are four main parts to Medicare.

Medicare Part A, hospital insurance, covers the following things:

  • Hospital stays
  • Care in skilled nursing facilities
  • Hospice care
  • And for some home healthcare

Medicare Part B, medical insurance, covers:

  • Doctor's services
  • Outpatient hospital care
  • Medical supplies
  • Preventative services

Medicare Part C, Medicare advantage plans, refers to a Medicare health plan that is actually offered by a private company working in tandem with Medicare to provide a person with both Part A and Part B, and many times offers Medicare Part D. Medicare Part D is prescription drug coverage.

To help remember all of the points I made, I like to break everything down in my head like this. Part D covers 'D'rugs, Part C includes 'C'ontracts with private companies. Part B refers to 'BO'uts of medical problems on an 'O'utpatient basis (which is doctors' visits after which you go home), while Part A refers to 'AI'lments on an 'I'npatient basis (meaning hospital stays).

Also, to help remember that Medicare provides care for the elderly, try to think about the fact that as you age, you need a little bit more 'care' than someone young and virile.

Medicaid: Definition and Function

This is important for me to distinguish because Medicaid is such a similar term, but Medicaid is used as 'aid' by low-income people. More technically, Medicaid is a federally and state-funded program, administered by each individual state, which provides government insurance for people of any age whose incomes are insufficient to pay for healthcare.

Medicaid helps to provide millions of Americans with important healthcare, especially children, people with disabilities, seniors, and pregnant women.

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