By Healthcare Brew Staff
less than 3 min read
Definition:
Medicare is a public health insurance program for people 65 and older, people under 65 with certain disabilities, and people with end-stage renal disease. It was established in 1965 and is overseen by the Centers for Medicare and Medicaid Services (CMS).
How does it work?
There are four Medicare programs:
- hospital insurance (Part A)
- supplementary medical insurance, which covers things like outpatient services (Part B)
- Medicare Advantage (MA) (Part C)
- the Medicare prescription drug benefit (Part D)
About 64 million beneficiaries were enrolled in Parts A and B as of March 2026, including 35 million in MA plans, which bundle Parts A, B, and usually D, per healthcare research nonprofit KFF.
Show me the money
Medicare is paid for by two US Treasury Medicare trust fund accounts. These accounts are funded primarily by taxes and funds authorized by Congress, with additional income from sources such as interest on trust fund investments, state payments, and premiums.
Spending on Medicare made up 21% of total national health expenditure in 2024, reaching more than $1 trillion, per CMS.
Despite that giant number, traditional Medicare typically reimburses providers less than private insurance in its fee-for-service payment model. In 2022, private insurers paid hospitals an average of 254% of what Medicare would have paid, per a RAND report.
Ripe for reform
With so much money at stake, it’s no wonder Medicare (and Medicaid) have been targeted in various reform efforts. For one, CMS aims to have all Medicare beneficiaries in value-based accountable care relationships by 2030.
The 2022 Inflation Reduction Act also brought changes to Medicare Part D, including allowing the government to negotiate prices directly with drug manufacturers. In February 2026, CMS announced the Comprehensive Regulations to Uncover Suspicious Healthcare initiative (CRUSH) to uncover fraud in Medicare and Medicaid.
Politicians have made a special effort to reduce MA overpayments, which can cost traditional Medicare money as well.
