ABSTRACT
Medicare is a federal entitlement program that provides basic health insurance coverage to most aged and certain disabled persons. Medicare has two components. The first is universal hospital insurance, which is paid from a trust fund that is primarily supported by a payroll tax of 2.6 percent levied and divided in a manner similar to social security taxes. The second component is the supplementary medical insurance (SMI) program, which covers the cost of physicians' services and certain other medical care expenses. The reconciliation act made several other changes in the SMI program, but each of them is expected to have only a minor cost-saving effect. The medicare program is expected to continue to grow rapidly as a result of the aging population and the declining relative proportion of persons in the workforce. This growing and seemingly uncontrollable aspect of the medicare program made it the object of administration attempts to reduce the federal budget.
