Many looking towards their future may be curious as to what the differences between Medicare and Social Security are. In this article, we will be more than happy to explain the difference between Social Security, Medicare, and Medicaid, and their respective benefits. While both are social benefit programs, they cover different aspects of life which together can be used to help you live a healthier and more (financially) comfortable life during your golden years.
What is Medicare?
Medicare is a joint federal and state government program that provides free or low-cost health insurance to many retired seniors. The federal government subsidizes a portion of funding and sets some guidelines, while states set up their funding and rules. Medicare is broken up into four parts known as Medicare Part A, B, C, and D.
Medicare Part A
Medicare Part A is known as Hospital Insurance and covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some at home health care. It’s important to note that this coverage does not extend to long-term or custodial care in these kinds of facilities. Generally, this program is free after enrollment and requires an application.
Medicare Part B
Medicare Part B is known as Medical Insurance and covers some doctor’s visits, outpatient care, medical supplies, and preventative services. This serves to cover most medically necessary services like annual checkups, laboratory services, and others not covered with Part A alone. This program does have an annual premium that must be paid when joined. As of 2015, the annual premium was $104.90 with a deductible of $147. Once seniors are eligible to claim Social Security, they can enroll in Part B.
What is Medicare Advantage?
Medical Advantage is what people call Medicare Part C. In this program, people can buy government subsidized health insurance policies through private companies that can, at times, provide better coverage than Medicare Part A and B alone. To be eligible, enrollment in Medicare Part A and Part B is necessary. The price of such a plan will vary state to state and coverage will vary between policies. To pick the best tailored policy, note what one requires from their coverage. It is important to note that although a Medicare Advantage Plan may have different rules, as stated by Medicare, “your plan must give you at least the same coverage as Original Medicare.”
Medicare Part D
Medicare Part D is prescription drug coverage and it’s an addition to Original Medicare, some Medicare cost plans, some Medicare private-fee-for-services plans, and Medicare medical savings account plans. These plans are offered by different Medicare approved insurance companies. This program is optional for those with Medicare and helps those concerned with covering the rising cost of prescription drugs. It can be used as an add on to existing Medicare Plans at a monthly premium, or can be included in a Medicare Advantage plan.
Eligibility For Medicare
People who are 65 or older, along with younger people with disabilities all qualify for Medicare. Those with End-Stage Renal Disease (ESRD) are also eligible. Those age 65 or older who have, or have a spouse who has, worked and paid Medicare taxes for at least 10 year or those receiving retirement benefits from Social Security are eligible for premium-free Part A. Others may have to pay a premium for Part A, but everyone has to pay a premium for Part B if they wish to purchase it.
What is Social Security?
Social Security is how most people refer to the Old-Age, Survivors, and Disability Insurance (OASDI) program run by the federal Social Security Administration. This program offers various benefits like retirement benefits and survivor benefits, as well as disability income. This program is known as a pay-as-you-go program meaning that, unlike pre-funded company pensions, today’s workers pay Social Security taxes in and that money flows out as monthly benefits for beneficiaries.
After having paid into the Social Security system for a minimum of 10 years, planning when to retire is a strategic move. For those seeking early retirement, benefits can begin at the age of 62. The longer people postpone their retirement, the higher their monthly benefit can be – Up to a maximum of 70 years of age. Benefits are calculated off the worker’s average indexed monthly earnings (AIME) during their 35 highest-earning years. The children of these retirees can also receive benefits up to their 18th birthday, or longer in the case of disability or being a student. Additionally, spouses can also claim benefits off their retiree spouse. This also applies for divorced spouses as long as their marriage lasted at least 10 years.
Disability benefits are for those that cannot work due to a physical or mental disability that is estimated to last for a minimum of a year. These benefits are also extended to those that cannot work due to a physical or mental disability that’s expected to result in death. Eligibility is not always certain and there are certain steps and checklists that must be taken into account first. Those seeking to qualify usually have to meet certain earnings tests, like work credits. For example, they must have first recently worked in a job covered by Social Security. These benefits also do extend to some family members.
In the unfortunate case of the death of a worker, their spouse and children may be eligible for survivor benefits based on the worker’s past earnings record. Qualifying requirements include spouses who are 60 years or older, as well as those 50 years or older and disabled as long as they have not remarried. Spouses caring for a child younger than 16 or a child with a disability may also be eligible for coverage. Generally, children can also receive benefits as long as they are younger than 18 or have a disability. Eligibility for benefits for parents who happen to be 62 years or older and were dependents of the worker for at least half of their income may also be available.
Eligibility For Social Security
Each branch of benefits has its own eligibility requirements, but these are some general requirements. To qualify for Social Security retirement benefits, workers have to be at least 62 years old and must have paid into the system for at least 10 years. Spouses and ex-spouses to those that qualify may also be eligible based on partner’s earnings. To qualify for disability benefits, the disability needs to be well documented and must be on the list of disabilities accepted.
How Do Social Security and Medicare Work Together?
Now, these two federal programs may be different but they do intertwine and affect each other. These programs are both individually funded by payroll taxes, provide benefits to those who are eligible, and help people with certain disabilities. Social Security retiree benefits work to give monthly allowances to those that qualify. Medicare health insurance plans require enrollment and the payment of a monthly fee for coverage, depending on enrollment plans. Enrollment in both these programs is handled through the Social Security Administration. Now, those who have paid their part through the Social Security tax, pay for their future retiree benefits and also pay for their Medicare Part A coverage. When receiving these benefits, those enrolled in Medicare Part B will probably have their premium taken out of their Social Security check. So, both Social Security and Medicare work together to simultaneously provide those who qualify with various benefits.