A Primer on Medicare: Key Facts About the Medicare Program and the People it Covers
Who is eligible for Medicare?
In 2015, Medicare provides health insurance coverage to 55 million people: 46 million people ages 65 and older and 9 million people with permanent disabilities who are under age 65.1
The four different parts of Medicare have varying eligibility requirements, as described below. In general, coverage under Medicare Part A and Part B is automatic when a Medicare-eligible individual applies for Social Security or Railroad Retirement benefits. Individuals can decline enrollment in Medicare Part B if they have other qualifying group coverage. If an individual qualifies for Medicare at age 65 but is not yet receiving Social Security or Railroad Retirement benefits, an application for Medicare is required to initiate Medicare coverage.
Most people age 65 and older are eligible for Part A, as are some people under age 65 with permanent disabilities and those with ESRD or ALS.
- Age 65 and older: People age 65 and older qualify for Medicare if they are U.S. citizens or permanent legal residents with at least five years of continuous residence. Individuals qualify without regard to their medical history or preexisting conditions, and do not need to meet an income or asset test.
- Under age 65: Adults under age 65 with permanent disabilities are eligible for Medicare after receiving Social Security Disability Income (SSDI) payments for 24 months.
- ESRD/ALS: People with end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS) are eligible for Medicare benefits as soon as they begin receiving SSDI payments, without having to wait an additional 24 months.
Since most people make payroll tax contributions during their working years, most people who are eligible for Part A do not need to pay premiums for covered services. However, people age 65 and older are required to pay a monthly premium to receive Part A benefits if neither they nor their spouse made payroll contributions for 40 or more quarters. Adults under age 65 who are eligible for Medicare do not need to pay premiums for Part A benefits.
People eligible for Part A are also eligible for Part B.
Medicare Part B is voluntary, but more than 90 percent of beneficiaries with Part A are also enrolled in Part B.2 For most individuals who become entitled to Part A, enrollment in Part B is automatic unless the individual declines enrollment. Individuals age 65 and older who are not entitled to premium-free Part A may enroll in Part B. With the exception of Medicare-eligible individuals who are working (or those with working spouses), who may delay enrollment in Part B if they receive employment-based coverage, those who do not sign up for Part B when they are first eligible typically pay a penalty for late enrollment in addition to the regular monthly premium for the duration of their enrollment in Part B.
People may choose to enroll in Part C, also known as Medicare Advantage, if they are entitled to Part A and enrolled in Part B.
Outside of their initial enrollment period for Medicare, beneficiaries can elect to enroll in a Medicare Advantage plan (or switch from one plan to another) on an annual basis between October 15 and December 7 of each year during the annual election period. Changes made during this period take effect on January 1 of the following year. Beneficiaries enrolled in a Medicare Advantage plan on January 1 who wish to disenroll and return to traditional Medicare have 45 days to do so (between January 1 and February 14 each year); they are not allowed to switch from one Medicare Advantage plan to another during this period.
People are eligible for Part D prescription drug coverage if they are enrolled in Part A, Part B, or both.
To get Part D benefits, beneficiaries must enroll in a stand-alone prescription drug plan (PDP) or Medicare Advantage prescription drug (MA-PD) plan. The annual election period for Part D runs from October 15 to December 7 each year. People who delay enrollment in Part D beyond their initial enrollment period and who do not have “creditable” drug coverage (at least comparable to the Part D standard benefit) during this time pay a permanent premium penalty if they choose to enroll in a Part D plan at a later time.