Medicare is health insurance for older adults and individuals who have a disability. It is paid for through funds received from Medicare taxes. Initially, when it was implemented in 1966, Medicare operated as a fee-for-service system. However, in attempts to cut escalating healthcare costs, Congress passed a series of acts (Title IX of the Social Security Act, Balanced Budget Act) which changed Medicare to a prospective basis. Today, all U.S. citizens or permanent residents aged 65 or over, who have paid Medicare taxes out of their paychecks for at least ten years are eligible for Medicare. However, an individual under 65 with a disability or requiring dialysis for end-stage renal disease (kidney failure) may also be eligible for Medicare.

Part A Medicare is also known as hospital insurance (HI) and covers hospital services that are deemed medically necessary in the treatment of an illness. This includes things like an inpatient room, psychiatric hospitalization, inpatient rehabilitation, nursing facility, home health services, hospice, and blood transfusions. When a Medicare patient begins an inpatient hospital stay, his/or her benefit period begins; this period does not end until the patient has been discharged from the hospital, or has not received nursing care, for a duration of 60 days. The patient may, if necessary, begin a new benefit period (he/or she is allowed an unlimited number of benefit periods).