Getting Your Financial Ducks In A Row Rotating Header Image

medicare

The ABC’s (and D’s) of Medicare

Mar 29th, 2013
by sraskie.
No comments yet

 

images

With more and more baby boomers retiring, more and more people including the Boomers, and their children and families are going to have questions and concerns about Medicare. Questions can range from what Medicare is, what it does, what it doesn’t do, and the nuances that make up our nation’s health care for retirees.

Medicare was created in 1965 by the Social Security Act and was signed into law by Lyndon Johnson.

Currently, Medicare is funded via taxation and premiums paid by Medicare subscriber. Part A – which we will cover in a future article, is funded by a 2.9% tax on wages. Unlike Social Security tax that has a limit or cap on the amount of income that can be taxed ($110,100 in 2012 and $113,700 in 2013), Medicare has no such wage base. The 2.9% tax is on an unlimited amount of earnings.

Eligibility for Medicare typically starts for those who turn age 65 and are permanent citizens of the US. Persons are automatically enrolled at age 65 if they have yet to start collecting Social Security. Persons electing to receive Social Security benefits before their full retirement age (FRA), must enroll manually in Medicare at age 65. Persons can also be eligible for Medicare based on having a disability covered under Social Security for 24 months, end-stage renal failure (requiring dialysis), and amyotrophic lateral sclerosis (ALS – Lou Gehrig’s Disease). Finally, Medicare is available for covered railroad workers receiving Railroad benefits.

According to Medicare.gov, enrollment is set to hit 78 million people by 2030 – as the majority of baby-boomers will be enrolled.

Medicare is broken down into three parts: A, B and D. Wait a second. Didn’t we skip a letter? Yes. We’ll talk about Part C or Medicare Advantage a little later on. Next time, we’ll talk about Part A.

Baby Boomers Start Medicare

Jan 7th, 2011
by jblankenship.
No comments yet

good old larkey by anslatadamsAs of 12:01am EST on January 1, 2011, the very first Baby Boomer reached age 65… and that means that the era of Baby Boomers receiving Medicare has officially commenced.

It is estimated that, during the period when Boomers are reaching age 65, between now and roughly 2030, the number of folks on the Medicare rolls will double.  Presently there are approximately 40 million Medicare recipients, and that number is expected to be around 80 million in 20 years.

These incredible numbers will cause major challenges in funding the system – along with serious challenges in controlling the overall costs of healthcare during this period.  The rate of increase in the over-65 population will cause dramatic changes in the healthcare system in terms of capacity, costs, and controls.

The new healthcare law passed earlier this year created an Independent Payment Advisory Board, which is supposed to provide guidance on how to control Medicare spending.  This will have to be accompanied by system-wide strategies to bring down the costs of medical care.

The only alternative to reducing costs is to increase taxes, and we all know how bitter of a pill that is.

Photo by anslatadams

What’s Up With Medicare Premiums? How Increases Are Determined

Jan 3rd, 2010
by jblankenship.
No comments yet

canal reflections by Zadok the PriestIf you are collecting Social Security and covered by Medicare, you may be wondering why your Medicare premium didn’t increase for 2010 or 2011… or if it did increase, why did it – since it didn’t increase for so many?

To understand this quandry, we need to look at the system for determining increases to Social Security benefits first.

Social Security – No COLA Increase for 2010 or 2011

For the year 2010 (and 2011), there is no Cost-Of-Living Adjustment (COLA) in Social Security benefits.  This is reflected by the fact that the Consumer Price Index (CPI) had not increased for the year (as of May, when the figures are determined).  While the COLA figures don’t parallel the CPI exactly, the CPI is a rough guide to follow when determining increases.

This is the first time in over 30 years that there will not be a COLA – there has been an automatic increase in benefits every year since 1975.  The 2009 increase was larger than average, at 5.9%.

Impact to Medicare

So what does this mean for Medicare costs?  Well, for most folks (about 75%) receiving Social Security, part of the news isn’t all bad:  since you already receive Medicare Part A for no premium, this will not change; and your Part B premium is linked to the COLA for Social Security, so it will remain unchanged for 2010 at $96.40 per month.  What isn’t linked to COLA is Part D drug coverage, so this will likely increase for most all beneficiaries, by a factor of approximately 7% – the average monthly premium will increase by $2 a month, from $28 to $30.

The Other 25%

How can you know if you’re in the 75% that will have unchanged Medicare Part B premiums or the “other” 25%?  One of the following three circumstances puts you into the “other” 25%:

  • You don’t have Medicare Part B premiums withheld from your Social Security checks;
  • You just started receiving Medicare benefits in 2010; or
  • You make too much money.

So, what’s too much money?  Medicare Part B premiums start to increase when your income is $85,000 for single filers, or $170,000 for joint tax filers.  At this level, your Part B premium will increase to $110.50 per month, an increase of roughly 15% over 2009’s cost.  Incidentally, this is the same premium that you can expect to pay if your income is not the factor but rather one of the first two circumstances applies to you.

As your income increases, the Part B premium increases as well, up to $353.60 per month if your income is above $214,000 for single or $428,000 for joint filers.

Summary

All in all, this isn’t a terrible thing – of course it’s not welcome, but it could be much worse.  The decision to bypass the COLA was made in May of 2009, and inflation has been pretty much benign since then.  For the majority of Social Security recipients, the overall impact should be minimal.

This is not to downplay the significance, especially to low-income seniors who rely almost exclusively on Social Security benefits, as many other costs (energy costs, food, housing, etc.) have increased, plus the value of home real estate has decreased dramatically.  These factors taken together can have a devastating impact on folks who have no other “safety net” available to them.  If you’re not presently in the position to have these concerns, you should take this information as a warning:  it is critical to develop additional resources to be ready and available in the case that subsidized sources of income are not available or are limited when in retirement.

Photo by Zadok the Priest
%d bloggers like this: