Medicare: An Awareness Discussion

April 2017 | Article

According to the PEW Research Center, about 10,000 baby boomers will turn 65 every day for the next 19 years. Similarly, many of them will begin enrolling in Medicare. We hear a lot about Medicare. Payroll taxes are taken from wages and self-employed earnings are dedicated to the Medicare program. However, most baby boomers don’t really understand Medicare. What is Medicare? How is it different from Medicaid?

Medicare is a program designed by the federal government to provide health care insurance to people age 65 or older. People younger than 65 can also qualify for Medicare if they have disabilities, permanent kidney failure or Lou Gehrig’s disease. The primary purpose of Medicare is to assist the payment of health care costs after reaching retirement age, which for Medicare, remains at age 65.

Medicaid is not the same program as Medicare. Both deal with health care costs, but Medicaid is not sponsored by the federal government. It is a state-run program designed to provide hospital and medical coverage to individuals with low income. Because Medicaid programs are provided and financed by the states, each program may have different rules for eligibility and coverage.
 
Medicare is divided into four parts. An electing participant can select the coverage (called parts) they want. The four parts of Medicare include:
Part A - Hospital Insurance
Part B - Medical Insurance
Part C - Medicare Advantage
Part D – Prescription Drug Coverage

While Medicaid is paid for by the states, Medicare is paid for by the current and future participants (sometimes referred to as beneficiaries). Current beneficiaries pay a monthly premium typically deducted from Social Security checks. Future beneficiaries finance the program through withholdings made on wages and self-employment income.

The current beneficiary’s premium is based on the Medicare parts selected and the taxable income level. Higher income beneficiaries pay a higher monthly premium. The current Medicare tax rate for future beneficiaries applied to all wages and self-employment earnings is 2.9 percent. However, only a self-employed person pays the full 2.9 percent. An employee is responsible for half, or 1.45 percent, of the total, with an employer picking up the other 1.45 percent.

A potential Medicare beneficiary should sign up for Medicare three months before or after the month they have their 65 birthday, even if they do not plan to retire at age 65. Signing up for Medicare at 65 will eliminate a 10 percent premium increase for each 12-month period a person was eligible for, but did not enroll.

There is a special enrollment period for a person 65 or older covered under a group health plan from personal, current employment or from a spouse’s current employment. The special enrollment period allows for a delay in enrollment, while currently covered under an employment group health plan, or as late as eight months following the last month of coverage or employment.

For more information about Medicare, go to www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227). Additional information also is available at www.socialsecurity.gov.

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