[6] President Dwight D. Eisenhower held the first White House Conference on Aging in January 1961, in which creating a health care program for social security beneficiaries was proposed.

In 1966, Medicare spurred the racial integration of thousands of waiting rooms, hospital floors, and physician practices by making payments to health care providers conditional on desegregation.

The amounts paid for mostly self-administered drugs under Part D are whatever is agreed upon between the sponsor (almost always through a pharmacy benefit manager also used in commercial insurance) and pharmaceutical distributors and/or manufacturers.

Part A's inpatient admitted hospital and skilled nursing coverage is largely funded by revenue from a 2.9% payroll tax levied on employers and workers (each pay 1.45%).

In addition, the fact that the number of payroll tax payors per enrollee will decline over time and that overall health care costs in the nation are rising pose substantial financial challenges to the program.

For example, if you have a long term disability that would prevent you from working, End-Stage Renal Disease, or Amyotrophic lateral sclerosis then you may be eligible for Medicare at an earlier age.

But, hospitals and physicians can take into consideration the pre-inpatient admission time when determining if a patient's care will reasonably be expected to cross two midnights to be covered under Part A.

[39] In addition to deciding which trust fund is used to pay for these various outpatient versus inpatient charges, the number of days for which a person is formally considered an admitted patient affects eligibility for Part A skilled nursing services.

[40][41] A study of 18 states conducted by the Agency for Healthcare Research and Quality (AHRQ) found that 1.8 million Medicare patients aged 65 and older were readmitted within 30 days of an initial hospital stay in 2011; the conditions with the highest readmission rates were congestive heart failure, sepsis, pneumonia, and COPD and bronchiectasis.

Hospice is covered 100% with no co-pay or deductible by Medicare Part A except that patients are responsible for a copay for outpatient drugs and respite care, if needed.

The RVUs themselves are largely decided by a private group of 29 (mostly specialist) physicians—the American Medical Association's Specialty Society Relative Value Scale Update Committee (RUC).

In its universality, Medicare differs substantially from private insurers, which decide whom to cover and what benefits to offer to manage their risk pools and ensure that their costs do not exceed premiums.

By statute, Medicare may only pay for items and services that are "reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member", unless there is another statutory authorization for payment.

Insurers, however, have far fewer disclosure requirements than Medicare, and studies show that customers in the private sector can find it difficult to know what their policy covers,[93] and at what cost.

[94] Moreover, since Medicare collects data about utilization and costs for its enrollees—data that private insurers treat as trade secrets—it gives researchers key information about health care system performance.

[96] Over the long-term, Medicare faces significant financial challenges because of rising overall health care costs, increasing enrollment as the population ages, and a decreasing ratio of workers to enrollees.

According to the 2018 estimate by the Medicare trustees, the trust fund was expected to become insolvent in 8 years (2026), at which time available revenue will cover around 85 percent of annual projected costs for Part A services.

Per capita spending relative to inflation per-capita GDP growth was to be an important factor used by the PPACA-specified Independent Payment Advisory Board (IPAB), as a measure to determine whether it must recommend to Congress proposals to reduce Medicare costs.

Each year, MMA requires the Medicare trustees to make a determination about whether general fund revenue is projected to exceed 45 percent of total program spending within a seven-year period.

In addition, as discussed throughout each annual Trustees' report, "the Medicare projections shown could be substantially understated as a result of other potentially unsustainable elements of current law."

[118] Meanwhile, the US population continues to grow both older and larger, which has led to greater demand for physicians, in part due to higher rates of illness and disease among the elderly compared to younger individuals.

On August 1, 2007, the US House of Representatives voted to reduce payments to Medicare Advantage providers in order to pay for expanded coverage of children's health under the SCHIP program.

The most substantial provisions slowed the growth rate of payments to hospitals and skilled nursing facilities under Part A of Medicare, through a variety of methods (e.g., percentage cuts, penalties for readmissions).

The law also created mechanisms, such as the Center for Medicare and Medicaid Innovation to fund experiments to identify new payment and delivery models that could conceivably be expanded to reduce the cost of health care while improving quality.

Some have raised concern about risk selection, where insurers find ways to avoid covering people expected to have high health care costs.

[150] A Kaiser Family Foundation study found that lowering the age to 60 could reduce costs for employer health plans by up to 15% if all eligible employees shifted to Medicare.

[155] Some have questioned the ability of the federal government to achieve greater savings than the largest PDPs, since some of the larger plans have coverage pools comparable to Medicare's, though the evidence from the VHA is promising.

[167] There is some concern that tying premiums to income would weaken Medicare politically over the long run, since people tend to be more supportive of universal social programs than of means-tested ones.

[168] Some Medicare supplemental insurance (or "Medigap") plans cover all of an enrollee's cost-sharing, insulating them from any out-of-pocket costs and guaranteeing financial security to individuals with significant health care needs.

[full citation needed] The Build Back Better legislation was passed in Congress in November 2021, and adds hearing services subject to Medicare Part B deductible and 20% coinsurance beginning in 2023.