Medicare is a federal health insurance program that subsidizes healthcare services in the U.S. The idea of a national healthcare program originated over 100 years ago — dating as far back as former President Teddy Roosevelt’s 1912 campaign. Medicare was created in 1965 under President Lyndon Johnson for people ages 65 and over, regardless of income, medical history, or health status. The program was expanded in 1972 to cover certain people under age 65 who have a long-term disability. Today, Medicare plays a key role in providing health and financial security to 60 million people with disabilities.
Together, Parts A & B make up what is called “Original Medicare”. Most people don’t pay a premium for Part A, which covers inpatient care, but pay one for Part B, which covers outpatient services. Premiums for Part B started at $3 in 1966 but have increased to $148.50 in 2021.
In 1997, Medicare Part C, now called “Medicare Advantage”, was offered by private insurance companies that get approved by Medicare. This also covers additional items and services that are not available with the Original Parts A & B.
Medicare underwent even more changes in 2003, when George W. Bush signed the Medicare Modernization Act. This legislation established a fourth part to Medicare, which adds prescription drug coverage. This is referred to as Part D and went into effect in 2006.
The role of Medicare Advantage has greatly expanded over the last decade. Enrollment in this type of plan has more than doubled, as the additional benefits it offers appeal to many. In 2021, more than 26 million people were enrolled in a Medicare Advantage plan, which is roughly 42 percent of the total Medicare population. With a constant increase of leads and a fast-growing market, the demand for new agents is at an all-time high.
Medicare is funded through two trust funds held by the U.S. Treasury. Funding sources include premiums, payroll and self-employment taxes, trust fund interest, and money authorized by the government. In 2019, the cost for Medicare was $644 billion — about 14% of total federal government spending. After Social Security, Medicare was the second-largest program in the federal budget that year.
The government contracts with private insurance carriers to handle Medicare Advantage and Part D. The carriers pay commissions to agents for finding Medicare beneficiaries to enroll in these plans. The maximum commission is set annually by The Centers for Medicare and Medicaid Services. Medigap plans are private health insurance plans, and the carrier typically pays a percentage of the annual plan premium as a commission to agents for these. Most compensation is tied to initial enrollment and retention, meaning agents earn a commission when a beneficiary renews their plan as well.