What Is Medicare? - Definition, Eligibility & Coverage

Instructor: Ian Lord

Ian has an MBA and is a real estate investor, former health professions educator, and Air Force veteran.

Let's take a look at what Medicare is and how U.S. workers qualify for coverage. In this lesson, we will also look at the four parts of Medicare and discuss what benefits these parts provide for patients.

Medicare Definition

Jane just received her first paycheck and is wondering what the amount taken out for something called Medicare is. Medicare is a federally funded medical insurance program for the elderly, disabled, and people with end stage renal disease or Amyotrophic Lateral Sclerosis (ALS).

The system is funded by mandatory employer contributions and employee paycheck withholding. Medicare provides coverage under four different parts; each part covers different types of expenses. Let's help Jane take a look at how she becomes eligible for Medicare and what different services the program provides.


Jane will most likely become eligible for Medicare when she reaches the age of 65. As long as she has been a legal U.S. resident for at least five years, she will qualify at that age. If she or her spouse have not worked for at least 10 years, she will have to pay a monthly premium to remain enrolled in Medicare Part A. While most elderly U.S. residents will qualify for Medicare, their work record dictates if they pay premiums for the benefits.

Jane is also eligible for Medicare if she becomes disabled and begins receiving Social Security Disability Insurance (SSDI). She will be eligible for Medicare two years after her eligibility date for receiving SSDI payments.

The other qualifying conditions include being diagnosed with end stage renal disease or requiring a kidney transplant. Patients with Amyotrophic Lateral Sclerosis (ALS), also known as Lou Gehrig's Disease, also qualify for Medicare benefits.


Medicare coverage is divided into four different parts. Each part pays for different expenses and has separate enrollment procedures.

Part A

Jane receives Part A benefits as part of her enrollment in Medicare at retirement. Part A will pay for Jane's hospital stays. It also covers other specialized services, such as nursing homes, skilled nursing care, home health visits, and hospice care. Most retirees do not pay any monthly premiums for Part A benefits.

Part B

Part B is an optional enrollment portion of Medicare that Jane would use like her regular health insurance. Jane will need to pay a monthly premium to receive Part B benefits. Part B is used to pay for outpatient care. Like other health insurance policies, many visits and services, such as preventative care, are covered at no cost to the patient. For other services, Part B often has a deductible after which Medicare picks up a greater portion of service costs.These can include certain exams, tests, medications administered during a healthcare visit, and even durable medical equipment (DME) ranging from crutches to scooters.

Part C

Jane may choose to be seen by a preferred provider organization (PPO) or health management organization (HMO) for her ongoing health care. Part C is commonly known as Medicare Advantage. This option is common with people who have already established care with one of these groups through their previous health insurance.

If Jane chooses Part C, she will receive benefits from that plan instead of Parts A and B. Medicare will pay a negotiated rate to the organization for monthly premiums, and Jane is responsible for paying any premium amount above the Medicare paid portion. The plan has an annual out of pocket maximum set each year; once that amount is paid, Medicare picks up the rest of the bills.

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