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In general, individuals are eligible for Medicare if they are a U.S. citizen or have been a permanent legal resident for 5 continuous years, and they are 65 years or older, or they are under 65, disabled and have been receiving either Social Security or the Railroad Retirement Board disability benefits for at least 24 months, or they get continuing dialysis for permanent kidney failure or need a kidney transplant, or they have Amyotrophic Lateral Sclerosis (ALS-Lou Gehrig's disease).

Many beneficiaries are dual-eligible. This means they qualify for both Medicare and Medicaid. In some states those with certain income, Medicaid will pay the beneficiaries Part B premium for them (most beneficiaries have worked long enough and have no Part A premium), and also pay any drugs that are not covered by Part D.
In 2007, Medicare provided health care coverage for 43 million Americans. Enrollment is expected to reach 77 million by 2031, when the baby boom generation is fully enrolled.[5]

Medicare Advantage
2."What Is the Role of the Federal Medicare Actuary?," American Academy of Actuaries, January 2002 
3."Social Insurance," Actuarial Standard of Practice No. 32, Actuarial Standards Board, January 1998 
4.Lisa Potetz, "Financing Medicare: an Issue Brief," the Kaiser Family Foundation, January 2008 
6. Medicare: Part A & B 
7.Mark Merlis, "The Value of Extra Benefits Offered by Medicare Advantage Plans in 2006," The Kaiser Family Foundation, January 2008 
11.2008 Medicare & You handbook, Centers for Medicare & Medicaid Services. 
12.Lauren A. McCormick, Russel T. Burge. Diffusion of Medicare's RBRVS and related physician payment policies - resource-based relative value scale - Medicare Payment Systems: Moving Toward the Future Health Care Financing Review. Winter, 1994. 

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Medicare Part D, Part B, Part C,
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Lyndon Johnson signs Medicare Amendment.  Harry Truman 
(The 1st enrollee) and his wife, Bess on right.
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Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are either age 65 and over, or who meet other special criteria. It was originally signed into law on July 30, 1965 by President Lyndon B. Johnson as amendments to Social Security legislation. At the bill-signing ceremony President Johnson enrolled former President Harry S. Truman as the first Medicare beneficiary and presented him with the first Medicare card.
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Part A covers hospital stays (including stays in a skilled nursing facility) if certain criteria are met:

1. The hospital stay must be at least three days, three midnights, not counting the discharge date. 
2. The nursing home stay must be for something diagnosed during the hospital stay or for the main             cause of hospital stay. For instance, hospital stay for broken hip and then nursing home stay for             physical therapy would be covered. 
3. If the patient is not receiving rehabilitation but has some other ailment that requires skilled nursing            supervision then the nursing home stay would be covered.
4. The care being rendered by the nursing home must be skilled. Medicare part A does not pay for             custodial, non-skilled, or long-term care activities, including activities of daily living (ADLs) such as           personal hygiene, cooking, cleaning, etc. 

The maximum length of stay that Medicare Part A will cover in a skilled nursing facility per ailment is 100 days. The first 20 days would be paid for in full by Medicare with the remaining 80 days requiring a co-payment (as of 2014, $152.00 per day). Many insurance companies have a provision for skilled nursing care in the policies they sell. If a beneficiary uses some portion of their Part A benefit and then goes at least 60 days without receiving skilled services, the 100-day clock is reset and the person qualifies for a new 100-day benefit period.
Part B medical insurance helps pay for some services and products not covered by Part A, generally on an outpatient basis. Part B is optional and may be deferred if the beneficiary or their spouse is still actively working. There is a lifetime penalty (10% per year) imposed for not taking Part B if not actively working.

Part B coverage includes physician and nursing services, x-rays, laboratory and diagnostic tests, influenza and pneumonia vaccinations, blood transfusions, renal dialysis, outpatient hospital procedures, limited ambulance transportation, immunosuppressive drugs for organ transplant recipients, chemotherapy, hormonal treatments such as lupron, and other outpatient medical treatments administered in a doctor's office. Medication administration is covered under Part B only if it is administered by the physician during an office visit.
Part B also helps with durable medical equipment (DME), including canes, walkers, wheelchairs, and mobility scooters for those with mobility impairments. Prosthetic devices such as artificial limbs and breast prosthesis following mastectomy, as well as one pair of eyeglasses following cataract surgery, and oxygen for home use is also covered.[6]

As with all Medicare benefits, Part B coverage is subject to medical necessity. Complex rules are used to manage the benefit, and advisories are periodically issued which describe coverage criteria. On the national level these advisories are issued by CMS, and are known as National Coverage Determinations (NCD). Local Coverage Determinations (LCD) only apply within the multi-state area managed by a specific regional Medicare Part B contractor, and Local Medical Review Policies (LMRP) were superseded by LCDs in 2003.

With the passage of the Balanced Budget Act of 1997, Medicare beneficiaries were given the option to receive their Medicare benefits through private health insurance plans, instead of through the Original Medicare plan (Parts A and B). These programs were known as "Medicare+Choice" or "Part C" plans. Pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the compensation and business practices changed for insurers that offer these plans, and "Medicare+Choice" plans became known as "Medicare Advantage" (MA) plans.

Original Medicare has a standard benefit package that covers medically necessary care members can receive from nearly any hospital or doctor in the country. For people who choose to enroll in a Medicare private health plan, Medicare pays the private health plan a set amount every month for each member. Members may have to pay a monthly premium in addition to the Medicare Part B premium and generally pay a fixed amount (a copayment of $20, for example) every time they see a doctor. The copayment can be higher to see a specialist.

The private plans are required to offer a benefit “package” that is at least as good as Medicare’s and cover everything Medicare covers, but they do not have to cover every benefit in the same way. Plans that pay less than Medicare for some benefits, like skilled nursing facility care, can balance their benefits package by offering lower copayments for doctor visits. Private plans use some of the excess payments they receive from the government for each enrollee to offer supplemental benefits. Some plans put a limit on their members’ annual out-of-pocket spending on medical care, providing some insurance against catastrophic costs over $5,000, for example. But many plans use the excess subsidies to offer dental coverage and other services not covered by Medicare and can leave members exposed to high medical bills if they fall seriously ill. Private plan members can end up with unexpectedly high out-of-pocket costs.

In 2006 enrollees in Medicare Advantage Private Fee-for-Service plans were offered a net extra benefit value (the value of the additional benefits minus any additional premium) of $55.92 a month more than the traditional Medicare benefit package; enrollees in other Medicare Advantage plans were offered a net extra benefit value of $71.22 a month more.[7]

Medicare Advantage Plans that also include Part D prescription drug benefits are known as a Medicare Advantage Prescription Drug plan or a MAPD.
Medicare Supplement Plan F
Medicare Part D went into effect on January 1, 2006. Anyone with Part A or B is eligible for Part D. It was made possible by the passage of the Medicare Prescription Drug, Improvement, and Modernization Act. In order to receive this benefit, a person with Medicare must enroll in a stand-alone Prescription Drug Plan (PDP) or Medicare Advantage plan with prescription drug coverage (MA-PD). These plans are approved and regulated by the Medicare program, but are actually designed and administered by private health insurance companies. Unlike Original Medicare (Part A and B), Part D coverage is not standardized. Plans choose which drugs (or even classes of drugs) they wish to cover, at what level (or tier) they wish to cover it, and are free to choose not to cover some drugs at all. The exception to this is drugs that Medicare specifically excludes from coverage, including but not limited to benzodiazepines, cough suppressant and barbiturates.[8][9] Plans that cover excluded drugs are not allowed to pass those costs on to Medicare, and plans are required to repay CMS if they are found to have billed Medicare in these cases.[10]

It should be noted again for beneficiaries who are dual-eligible (Medicare and Medicaid eligible) Medicaid will pay for drugs not covered by part D of Medicare, such as benzodiazepines, and other restricted controlled substances.
Neither Part A nor Part B pays for all of a covered person's medical costs. The program contains premiums, deductibles and co-pays, which the covered individual must pay out-of-pocket. Some people may qualify to have other governmental programs (such as Medicaid) pay premiums and some or all of the costs associated with Medicare.

Some people elect to purchase a type of supplemental coverage, called a Medigap plan, to help fill the holes in Original Medicare (Part A and B). These Medigap insurance policies are standardized by CMS, but are sold and administered by private companies. There is currently no CMS approved supplemental coverage available to fill the Donut Hole, a coverage gap built into Medicare's Part D benefit.

Medicare Supplement Insurance benefitsInsurance
Most Medicare enrollees do not pay a monthly Part A premium, because they (or a spouse) have had 40 or more quarters in which they paid Federal Insurance Contributions Act taxes. Medicare-eligible persons who do not have 40 or more quarters of Medicare-covered employment may purchase Part A for a monthly premium of:
 $234.00 per month (2014) for those with 30-39 quarters of Medicare-covered employment, or 
 $426.00 per month (in 2014) for those with less than 30 quarters of Medicare-covered employment and               who are not otherwise eligible for premium-free Part A coverage. 

All Medicare Part B enrollees pay an insurance premium for this coverage; the standard Part B premium for 2014 is $104.90 per month. A new income-based premium scheme has been in effect for 2009, wherein Part B premiums are higher for beneficiaries with incomes exceeding $85,000 for individuals or $170,000 for married couples. Depending on the extent to which beneficiary earnings exceed the base income, these higher Part B premiums are $146.90, $209.80, $272.70, or $335.70 for 2014, with the highest premium paid by individuals earning more than $214,000, or married couples earning more than $428,000.[11]

Medicare Part B premiums are commonly deducted automatically from beneficiaries' monthly Social Security checks.

Part C and D plans may or may not charge premiums, at the programs' discretion. Part C plans may also choose to rebate a portion of the Part B premium to the member.

Medicare Supplement Insurance
Medicare supplement insurance
Medicare supplemental insurance premiums
Medicare Supplement Insurance
Part A — For each benefit period, a beneficiary will pay:
a. Part A deductible of $1,216 (in 2014) for a hospital stay of 1-60 days.
b. $304 per day co-pay (in 2014) for days 61-90 of a hospital stay. 
c. $608 per day co-pay (in 2014) for days 91-150 of a hospital stay, as part of their limited Lifetime  reserve days. 
d. All costs for each day beyond 150 days. [11]
e. Coinsurance for a Skilled Nursing Facility is $152.50 per day (in 2014) for days 21 through 100 for each benefit period. 
 f. Blood deductible of the first 3 pints of blood needed in a calendar year, unless replaced. 

Part B — After a beneficiary meets the yearly deductible of $147.00 (in 2014), they will be required to pay a co-insurance of 20% of the Medicare-approved amount for all services covered by Part B. They are also required to pay an excess charge of 15% for services rendered by non-participating Medicare providers.
The deductibles and coinsurance charges for Part C and D plans vary from plan to plan.

Original Medicare" program has two parts: Part A (Hospital Insurance), and Part B (Medical Insurance). Only a few special cases exist where prescription drugs are covered by Original Medicare, but as of January 2006, Medicare Part D provides more comprehensive drug coverage. Medicare Advantage plans are another way for beneficiaries to receive their Part A, B and D benefits.