Everything You Need to Know About Medicare in the United States

By: Dylan_Moran

Started in 1965 under the Social Security Administration, Medicare is a single-payer national health insurance program aimed at providing health insurance to people who are 65 and older, younger individuals with disabilities and those suffering from End-Stage Renal Disease.

It covers hospital care, outpatient services and prescription drugs. In 2015, Medicare covered 16.3 percent of the United States’ population and in that year alone, 56 million people were enrolled in the program. 47 million of those individuals were the elderly and approximately nine million had disabilities.

But how exactly does Medicare in the United States work? Here’s what you need to know:

Medicare Is Funded by Taxpayers

Taxpayers in the United States are required to pay 1.45% of their earnings into the Federal Insurance Contributions Act that goes towards Medicare. Employers also pay an additional 1.45% and self-employed individuals pay the entire 2.9%. Individuals earning more than $200,000 and couples earning more than $250,000 together are required to pay an additional 0.9% tax.

In 2015, Medicare earned $630 billion, 80% of which came from payroll taxes and general revenues. It also generates income from state payments, interests, beneficiary premiums and social security benefit taxations.

Medicare Enrollment Has a Deadline

You are given a seven-month window to sign up for Medicare. This includes the three months before your 65th birthday, your birthday month and the three months after your birthday. You will be automatically enrolled in Parts A and B if you’re already taking Social Security benefits. You have the option, however, to refuse Part B if you don’t want to pay for the monthly cost. If you’re still employed and have group health insurance, you will need to sign up for Medicare within eight months of losing coverage. Failure to follow these initial enrollment periods will result to penalties.

If you missed signing up for Part B during the initial seven-month window, you can do it during the general enrollment period from January 1 to March 31, but you need to pay a 10% penalty for life for each annual period you delay.

Open enrollment runs from October 15 to December 17. During this period, you can switch between Medicare and Medicare Advantage. In 2019, Advantage enrollees will be allowed to switch to a new Advantage or original Medicare plan during the general enrollment period. In addition, you can switch to a Medicare Advantage plan or Part D plan outside the enrollment period if those plans have a five-star quality rating in your area.

Medicare Is Not Entirely Free

Medicare plans are divided into parts. Part A covers hospital services and is free if either you or your spouse has paid Medicare payroll taxes for at least ten years. Part B, which covers outpatient services has a standard premium of $134 per month. Part D covers prescription costs and has a monthly premium of $35. This cost varies, however, depending on the plan you choose.

Aside from monthly premiums, you may also be subject to deductibles, co-payments and other out-of-pocket costs. In 2018, Part B has a deductible of $183 and Part A has a deductible of $1,340 for each benefit period if the beneficiary is hospitalized. Additional costs apply for hospital stays exceeding 60 days.

Medigap Supplemental Plans Can Fill Medicare Gaps

If you don’t want to shell out extra money for out-of-pocket costs, private insurance companies offer medigap supplemental insurance plans to cover co-payments, deductibles and other expenses. Medigap policies are identified by letters A through N, and each policy that goes with the same letter should offer the same benefits. Their only difference is cost. Plan F is a popular choice among beneficiaries because it offers comprehensive coverage.

High Earners Pay Higher Medicare Premiums

If the adjusted gross income is more than $85,000 for singles and $170,000, premiums for married individuals filing jointly, parts B and D of their Medicare plan will come with a surcharge. In 2018, high earners pay $187.50 to $428.60 per month for part B. They also needed to pay an additional $13 to $74.80 for part D on top of their monthly premiums.

Medicare has benefited millions of individuals since it was first introduced, and it can also help you during your later years if you know exactly how it works and how you can take advantage of its offers.

By Dylan M.

© 2018 Copyright Dylan M. - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.