MEDICARE
Back to GlossaryDefinition
Federal government levies a tax on individual’s wages for federal health insurance, which may be claimed by individual’s once they reach retirement or for people with disabilities.
Summary
Medicare is a federal health insurance program primarily for Americans aged 65 and older, funded through payroll taxes collected throughout workers' careers. During employment, both employees and employers pay Medicare taxes (1.45% each) on wages, which creates a trust fund. Upon reaching age 65 or qualifying due to certain disabilities, individuals can access Medicare benefits to help cover medical expenses including hospital care, doctor visits, and prescription drugs.
Usage Context
Essential for understanding government social insurance programs, payroll tax calculations, retirement planning, and healthcare policy discussions in economics, public policy, or personal finance courses.
Common Confusions
- Thinking Medicare and Medicaid are the same program
- Believing Medicare covers all medical expenses completely
- Assuming Medicare taxes stop when you start receiving benefits
- Confusing Medicare eligibility age with Social Security retirement age
- Not understanding that Medicare has different parts with different coverage
