As we've seen the United States has an incredibly complex private insurance market. There are not-for-profit insurers like Blue Cross and Blue Shield. They are for-profit insurers like Humana and Aetna. They sell to individuals, about 60 million individuals who buy insurance on their own. But predominantly they sell to employers and cover workers at employers or what's called the group market. That's an incredibly complex system. It's matched by an incredibly complex governmental financing system for healthcare. At the federal level we have Medicare and Medicaid. We also have Veterans Administration covering vets, Tricare covering military personnel. Let's start with Medicare. Medicare was passed in 1965, and enrolled its first people in 1966. Originally, it was composed of two parts, part A and Part B. Part A was to cover hospital care services, and it was modeled on social security. It was paid for through payroll taxes. Some of the money coming from the employer, some of the money coming from the worker. And it paid the hospital bill. Part B was to pay for physician services as well as some other services; x-rays, lab test, ambulance, as well as some specialized things like cancer chemotherapy drugs and physical therapy. Part B is not paid through payroll tax. It's paid through premium that the individual Medicare beneficiary pays about 25% of the costs, and 75% of the cost comes from general tax revenue. That system worked fine it was called Medicare Fee for Service. Then in 1997, Medicare added Part C or what's called Medicare Advantage. It's a managed care kind of program. Private insurance companies advertise to elderly people and if they want it they sign up. The private insurance companies have to provide all the services covered in part A and B, and they can cover additional services like drugs and other services. But they are responsible for all of the care of the elderly. In 2006 under President Bush, Part D or the drug benefit for Medicare was enacted. Again this is a voluntary program the elderly can opt-in. If they do they have to pay a premium that covers about 25% of the cost, but the general tax revenue covers the other 75% of costs. And about 30 million of the 50 million people in Medicare take Part D. In addition to all the government programs, there's Medigap which is a private program to fill in the holes of Medicare. It's a way that the elderly can buy insurance to pay for deductibles, coinsurance and other copayment programs. It's been reorganized into 12 distinct types of insurance products that the elderly can buy. Medicare was started in 1966. There were about 19 million people. Over the years it's grown tremendously so that today there's about 52 million people enrolled. Most of them, the vast majority of them are the elderly people at 65, but some of them are non-elderly disabled. One large group of that are patients who have end-stage renal disease or ESRD. Medicare pays for their dialysis or their kidney transplant. Another much smaller group are people who have Amyotrophic Lateral Sclerosis (ALS) or Lou Gehrig's disease, and again they get Medicare beneficiaries and some non-elderly people who are disabled also get Medicare benefits. In addition to paying for hospital, doctor care, and drugs, there are some other add-on payments that Medicare gives so that the government can support what it considers worthy programs. Let's just highlight three of them. One of them is called Graduate Medical Education or GME. This is payments to hospitals to train interns and residents, future doctors of America. And the federal government spends about $10 billion paying hospitals to train them. Disproportionate Share Hospitals or more commonly known as DSH payments are payments from the federal government to hospitals who care for the uninsured to compensate them for the free care they give uninsured people. That comes to about $11 billion a year. And then Critical Access Hospitals is another federal program supporting small hospitals those with fewer than 25 beds in rural areas that provide emergency services to rural residents. That comes to about $8.5 billion a year. That's Medicare, the program for people who are 65 years and older. Next, we're going to talk about Medicaid, how poor people get their health coverage through the government.