Medicare Database Description Medicare Background

Medicare was established by Title XVIII of the Social Security Amendment of 1965; the program began on July 1, 1966.

Medicare is a health insurance program funded solely by the US federal government and is administered by the Centers for Medicare & Medicaid Services (CMS) --(formerly, the Health Care Financing Administration (HCFA)) -- within the Department of Health and Human Services (DHHS).

In fee-for-service plans, Medicaid is billed by health care providers (physicians, hospitals, and pharmacies) for specific goods and services provided (physician visits, hospitalizations, and prescription drugs). In capitated plans, Medicaid pays an insurance company a certain dollar amount per person per time period (e.g., month) to cover all or specific aspects of that enrollee's health care. Importantly for researchers, the degree of completeness of encounter information for patients in capitated plans depends on the specific plan.

Medicare provides:

  • Part A, Hospital Insurance - covering inpatient care in hospitals, including critical access hospitals, and skilled nursing facilities (not custodial or long-term care), hospice care, and some home health care.
  • Part B, Medical Insurance - covering doctors' services and outpatient care, some other medical services that Part A doesn't cover (some of the services of physical and occupational therapists, and some home health care).
  • Part C, Medicare Advantage Plans HMOs and PPOs; private Medicare-approved insurance companies offering combined hospital and medical coverage.
  • Part D, Prescription Drug Coverage - Historically Medicare has not paid for outpatient drugs, but beginning on January 1, 2006 (under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003) a comprehensive prescription drug benefit has been offered.
  • Medigap a supplemental insurance policy, sold by private insurance companies, to fill-in gaps of Part A and Part B coverage. More can be learned at

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