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Senior citizens face special problems in the area 

of health care costs because

they often need more 

extensive care than other members of society, 

and because their resources are often limited.

Overview (continued)

Three broad types of coverage exist for insuring 

the health care needs of the elderly.

Medicare

Medicare supplement (or Medigap) policies

Long-term 

care insurance

Besides these forms of social and 

private insurance, the federal Medicaid program 

also provides financing for the health care needs 

of senior citizens.

The Medicare Program

Medicare was added to the Social Security Act in 1965

It introduced two forms of essential health 

insurance for virtually all citizens over 65 and 

for certain disabled persons. 

Part A is compulsory 

Hospitalization Insurance, which is financed by a 

1.45 FICA payroll tax levied on employers and 

employees.

Part B is Supplemental Medical 

Insurance (SMI), pays for physicians’ 

services and other medical expenses not 

covered by Part A, financed by monthly 

premiums shared by the participants and 

the federal government.  ($54 in 2002). 

Saving the Medicare System

Recent history of Medicare has been characterized 

by efforts to “save” the system from financial 

difficulties resulting from 

the increase in the 

number of beneficiaries 

the increase in health 

care costs generally.

1997 Report of Medicare Trust 

Fund trustees predicted that barring change, 

the Trust Fund would be broke by 2001.