Your Financial Future: Learning the facts about Medicare
Today, we are going to discuss one of the most important government programs for seniors – Medicare.
Many people are concerned about what they are hearing in political ads. Like many so called facts in campaigns, both sides take many things out of context and try to make things look better for themselves.
The temporary deferral of some payroll taxes will not make the trust fund go broke in three years. This money must be paid back after the first of the year. The COVID-19 pandemic has had a major negative affect. Since Medicare Part A is funded from payroll taxes, all of the job losses have greatly reduced the money paid in. You do not pay these funds on unemployment benefits.
There are actually different funding sources for different parts of Medicare. Part A of Medicare covers inpatient hospital, skilled nursing facility, home health and hospice services. This skilled nursing coverage is not long term care. If you have been admitted to a hospital for at least three days you can get coverage for up to twenty days for free if necessary. Days 21 to 100 have sizable co-pay on your part. There is no nursing care after this limited time frame.
The HI trust is funded primary from payroll taxes. Both you and your employer pay these taxes. If you have worked 10 years, you pay no additional premiums while collecting Medicare unless you continue to have earned income. A portion of the money the government pays to insurance companies to fund advantage plans also comes from this trust fund. In 2024, this could become insolvent. This is a problem that has been brewing for decades as baby boomers retire and medical costs increase. While the soaring unemployment did not help the funds balance, a short delay did not cause the problem any more than moving the income tax deadline back three months until July 15th.
Part B covers doctors, providers, medical equipment, lab test and a few other things. It is paid approximately 25% by the seniors and 75% by the government. It covers doctors, providers, medical equipment, lab test and a few other things. This is what participants are currently paying $144.60 a month for. Higher income people pay higher premiums through IRMAA charges. There are also deductibles and copays that seniors pay for Medicare. These are often partially or fully insured with policies from private insurance companies.
Washington must find a way to fix the Part A issues. There have been a number of different ideas floated how to manage some of these medical costs. There are proposals to negotiate drug cost, allow drugs to be imported from other countries and various other measures to control cost. The pros and cons of each need to be debated and worked on in a nonpartisan way for the good of the country. There has been some talk of expanding Medicare, but we have to remember seniors have paid into this program all of their working lives and the benefits they paid for must be protected. It is usually not a good time to expand anything when you have budget shortfalls.
Next week we will discuss some ways to fix the Social Security situation in a fair and equitable way. This is another area where we must protect our seniors.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.