Medicare: Fast Facts for Retirees

What is Medicare, and when did Medicare begin?

Medicare is a national social insurance program, administered by the U.S. Federal Government since 1965. It guarantees access to health insurance for Americans ages 65 and older. Younger people with disabilities, as well as people with end-stage renal disease are also eligible. The program helps with the cost of health care. It does not cover all medical expenses or the cost of most long-term care.

Who pays for the cost of Medicare?

You and your employer pay taxes for Medicare. Self-employed people pay both the employee and employer taxes. The employer and employee rate for 2017 is 1.45 percent of payroll. The tax is levied on every penny you earn.

How much in Medicare tax does a self-employed individual pay?

You pay tax on 2.9 percent of your net earnings from self-employment.This compares to the employer share and the employee share if you are not self-employed.

What are the four main parts of Medicare? 

Hospital Insurance (Part A)

• Part A helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay). Some home health care and hospice care costs are also covered.
• Most people age 65 or older are eligible for free Part A. This assumes they have worked and paid Medicare taxes long enough.
• You should sign up for Part A three months before your 65th birthday. You should do this whether or not you want to begin receiving Social Security retirement benefits.
• You usually do not pay a monthly premium for Part A coverage if you or your spouse paid Medicare taxes while working. If you are not eligible for premium free Part A coverage, you may be able to buy it under certain circumstances.

Medical Insurance (Part B)

• Part B helps pay for doctors’ services and many other medical services and supplies that are not covered by Part A.
• Anyone who is eligible for free Part A can enroll in Part B by paying a monthly premium.
• Some beneficiaries with higher incomes will pay a higher monthly Part B premium.
• When you sign up for Part A, you will be asked if you want to enroll in Part B. If you do not choose to enroll in Part B and then decide to do so later, your coverage may be delayed and you may have to pay a higher monthly premium. Timely enrollment in Part B may save you money.
• If you are age 65 or older and your medical insurance coverage is under a group health plan based on you or your spouse’s current employment, you may not need to apply for Part B at age 65. You may qualify for a “Special Enrollment Period” (SEP).
• You pay the Part B premium each month. Most people will pay the standard premium amount, which is $104.90 in 2013. However, if your modified adjusted gross income on your federal tax return from two years ago is above a certain amount, you pay more.

Medicare Advantage (Part C)

• People with Parts A and B can choose to receive all of their health care services through one provider organization under Medicare Part C. This is called a Medicare Advantage Plan.
• An Advantage Plan is a type of health plan offered by a private company that contracts with Medicare to provide you with all your Part A and Part B benefits.
• If you’re enrolled in an Advantage Plan, Medicare services are covered through the plan and aren’t paid for under Original Medicare.
• Medicare Advantage Plans usually include Part D as part of the plan.
• Advantage Plans may include extra benefits and services for an extra cost.
• The most common type of Advantage Plans are:
  • Health Maintenance Organization (HMO)
  • Preferred Provider Organization (PPO)
  • Private Fee for Services (PFFS)
• Your monthly premium varies widely depending on the state you live in and the private insurer you choose, as well as what type of Advantage Plan you choose.
• Medicare Special Needs Plans (SNP) are a type of Medicare Advantage Plan. Membership is limited to people with specific diseases or characteristics, including diabetes, End-Stage Renal Disease, HIV/AIDS, chronic heart failure, or dementia. The plan tailors their benefits to best meet the needs of the group they serve.

Prescription Drug Coverage (Part D)

• Medicare Part D helps pay for medications doctors prescribe for treatment.
• Part D plans are operated by Medicare-approved private insurance companies.
• Your actual drug plan costs will vary depending on your prescriptions and whether they are on the drug list of the plan you choose, which pharmacy you use, whether you get extra help in paying for Part D costs and your income level.

Rules can be quite complicated. Are there particular matters you had difficulty understanding? Is there advice you can offer to help understand Medicare more fully?

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