Retirees and health care advocates will celebrate the 47th anniversary of Medicare this week in events throughout the country. Although it is the nation’s most popular social insurance program, Medicare continues to be a focal point of struggle between those seeking to strengthen and expand it and those seeking to weaken and destroy it.

Here is a summary of this important program:

 Enacted July 30, 1965, Medicare is administered by the federal government. It guarantees health insurance for Americans ages 65 and older as well as for people of any age with disabilities or end stage renal disease. As a social insurance program, Medicare spreads the financial risk associated with illness across society to protect everyone, and thus differs fundamentally from private insurance, which manages a risk portfolio to guarantee private profit.

Congress established Medicare under the Social Security Act to provide eligible beneficiaries with health insurance, regardless of income or medical history. Before Medicare, only half of older adults had health insurance, with coverage often unavailable or unaffordable to the other half. Older adults had half as much income as younger people and paid nearly three times as much for health insurance. Often family members had to shoulder the health care expense of their elderly relatives.

One little-recognized impact is that Medicare also spurred the integration of thousands of waiting rooms, hospital floors, and physician practices by making payments to health care providers conditional on desegregation.

While the USA ranks low compared to other industrialized nations in average life expectancy and infant mortality, we rank high in the measure of those who reach 65 and live until 85.

Medicare is funded by revenue from a 2.9 percent payroll tax shared equally by employers and workers. The administrative overhead costs (two percent) are well below that of large companies that are self-insured (five to ten percent), health insurers offering coverage to small employers (25-27 percent), and individual insurance (40 percent). Insurers offering coverage in “Medicare Advantage” plans spend up to 16.7 percent on profit and overhead.

 There are four parts to Medicare: A, B, C, and D.

Part A (hospital insurance) covers inpatient hospital stays, including semiprivate room, food, and tests, and brief stays for convalescence in a skilled nursing facility.

Part B (medical insurance) pays for doctor visits and services and products not covered by Part A, generally on an outpatient basis.

Part C provides Medicare beneficiaries, under the 1997 Balanced Budget Act, with the option to receive their Medicare benefits through private insurance, instead of through the original Medicare plan (Parts A and B).  As Part C costs the government about 14 percent more than traditional Medicare, it is being phased out in the new health reform law (the Affordable Care Act, aka “Obamacare”).

Part D (prescription drug plans) went into effect on January 1, 2006 and covers prescriptions up to a cost point, then no long covers them until another cost point is reached (the coverage gap or ‘donut hole’). Part D did not allow for negotiation of prescription prices, but this and the coverage gap are addressed in the new health reform law.

The new health reform law reduces costs and increases benefits. It reduces payments to privately managed Medicare Advantage plans to align more closely with rates paid under traditional Medicare and reduces annual increases in payments to physicians and hospitals. These and other adjustments reduce Medicare’s projected cost over the next decade by $455 billion.

In terms of benefits, the Affordable Care Act progressively closes the “donut hole” in Part D prescription drug coverage saving beneficiaries an average of $2,000 a year by 2020. It restructures Medicare premiums shifting the cost more onto those with the highest income. The law also expands coverage of preventive services.

 The continual rise in health care costs certainly impacts Medicare and, as a share of GDP, its cost is expected to grow from 3.6 percent in 2010 to 6.2 percent by 2080. But that is still a small price to pay. A mere four to six percent provides full health coverage for all our elderly and disabled citizens.

Happy Birthday, Medicare!