It is common to get Medicare and Social Security mixed up. After all, both Social Security and Medicare are federal government programs with a common goal – helping seniors.
Social Security is run by the Social Security Administration (SSA), and Medicare is run by the Center for Medicare and Medicaid Services (CMS).
While Medicare and Social Security aren’t quite interchangeable, they do work together. Here’s how.
What is Social Security and what is Medicare?
The Social Security Act was signed into effect by President Franklin D. Roosevelt in 1935 in response to the Great Depression. If you’ve ever looked at your pay stub you might have noticed that you pay Social Security taxes. These taxes are pooled together and then paid out to eligible seniors so that they have continued income after retirement.
Medicare is a federal program that provides seniors and other qualifying individuals with health insurance. Medicare is divided into multiple parts.
- Part A covers inpatient hospital care, skilled nursing facility care, hospice, and home health care.
- Part B covers outpatient care, including doctors’ appointments, durable medical equipment, and preventive care like screenings and vaccines.
Together, Parts A and B are referred to as “Original Medicare.”
- Part C is also known as Medicare Advantage and includes additional coverage benefits.
- Part D is prescription drug coverage.
- You may also have heard about Medigap, or Medicare supplement, plans. These plans fill in the “gaps” in Original Medicare.
Just like with Social Security, you pay Medicare taxes while working. Because of this, many beneficiaries will automatically receive Medicare Part A premium free.
So how do Social Security and Medicare work together?
Eligibility for Social Security is based on income you earned while you were working, while eligibility for Medicare is more standard and typically starts at age 65. Even though the two programs are run by different organizations, the SSA carries out a lot of administrative functions for Medicare, including determining who is eligible.
This means once you become eligible for Medicare, you will receive information about enrolling from the Social Security Administration.
Once eligible, you can begin receiving Social Security benefits anytime between ages 62 and 70. The Social Security Administration sets a “full retirement age” based on birth year. If you begin receiving benefits before you reach your full retirement age the benefit amount will be reduced. Waiting past your full retirement age to claim benefits can add up to an additional 8% per year, until you turn 70, to your payout. Because you have the option to choose when you want to enroll in Social Security, there is no automatic enrollment and you will need to contact the SSA to enroll.
If you haven’t started to claim your Social Security benefits by the time you turn 65, you’ll need to contact the Social Security Administration to enroll in Medicare. Your first chance to enroll is the Initial Enrollment Period (IEP) which begins 3 months before you turn 65 and ends 3 months after you turn 65.
Medicare Parts C and D, as well as Medigap plans, are voluntary once you have enrolled in Original Medicare and enrollment is completed through private insurance companies.
If you are already receiving Social Security benefits three months before your 65th birthday, the SSA will send you a Medicare enrollment package. On your 65th birthday, you will automatically be enrolled in Medicare Parts A and B.
You have the option to “delay” Medicare Part B enrollment, but it may cost you more and lead to gaps in coverage.
For many, Medicare Part A is premium free; however, Medicare Part B usually requires a monthly premium based on your income. The Social Security Administration determines how much your premium will be based on the income you have reported to the Internal Revenue Service (IRS).
In 2020, the standard Part B premium is $144.60 per month and increases based on your income.
If you are receiving Social Security and Medicare simultaneously, your Part B premium will automatically be deducted from your monthly Social Security benefit. However, if you’re still waiting to draw Social Security you will receive a bill from the Center for Medicare and Medicaid Services on a quarterly basis.
Talk to a licensed Medicare insurance consultant
If you’re having a hard time understanding the difference between Social Security and Medicare, or how they work, our licensed Medicare insurance consultants are here to help. From navigating if the information you receive regarding these programs is legitimate, to making the right Medicare enrollment decisions for you, Grace Agency is ready to meet your needs with a kinder and gentler approach to the world of Medicare insurance and there are never any fees for any of our services.