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Medicare is a national health insurance program for people age 65 and above, people of any age with certain disabilities or anyone diagnosed with end-stage renal disease. U.S. citizens and resident aliens with a minimum of 5 years residency are eligible to receive Medicare benefits. Medicare was enacted into law in 1965 and integrated with the Federal Insurance Contributions Act (FICA) of 1935, which created Social Security. All employers in the U.S. are required to withhold and match Social Security and Medicare taxes from their employees' gross earnings. Unlike Social Security, there is no taxable earnings cap for Medicare contributions. For example, if the portion of employee earnings to be withheld is 1.5%, the employer must also contribute 1.5%, bringing the total Medicare tax submitted by employers to 3% of employee gross earnings. This applies whether an employee earns $1 or $1,00,000,000 in a year. Self-employed individuals would pay the full amount, or 3% in the above example (since they are both employer and employee). Internal Revenue Service (IRS) form W-4 is used by employers to determine withholding and matching amounts, including those for Medicare.

Medicare eligibility rules and benefits are divided into four parts. Parts A and B, together called Original Medicare, are directly administered by Medicare. Part A covers inpatient care (hospital and home visits). Part B covers outpatient care. Part C, called the Medicare Advantage Plan, is private health insurance approved by Medicare. It includes Medicare Parts A and B. Part D is a prescription drug benefit available with Original Medicare or Medicare Advantage. Medicare is not to be confused with Medicaid, a national health insurance program for low-income individuals and families.

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