Celebrating Medicare’s birthday
This week, we are celebrating the birthday of Medicare. It started on July 30, 1965. Medicare provides help with health care for seniors. This program now offers protection to over 60 million Americans. Often seniors who want to retire in their early 60s can’t because how expensive health insurance is. If you do not qualify for a subsidy from the exchange, it could cost between $800 to $1,000 per month for one person. Once you reach age 65 and can go on Medicare, retirement becomes a possibility.
Everyone must go on Medicare when they turn 65 unless they or their spouse have coverage from a group plan with 20 or more participants. There are penalties if you do not enroll at the right time, and these extra costs last a lifetime. Medicare does not cover all medical costs. It is an 80/20 program with lots of deductibles. For this reason, 98% of people have some kind of private insurance coverage.
Part A of Medicare is available to most people at no cost. This is because you have been paying into it all of your working life. This covers hospital costs. Part B costs $148.50 per month. Its cost can be adjusted each year and is deducted from your Social Security check. If you are delaying receiving Social Security to increase your benefit, you will be billed once per quarter. It covers doctors and medical testing. Part C is an Advantage Plan, which is one of the type’s PF private insurance coverage. Part D began during the George W. Bush administration to help with prescription costs. It does not cover all drug costs, but can be a valuable help to many people.
Medicare does not cover all medical costs. In basic Medicare there is no dental, hearing aids, cosmetic surgery or eye care coverage. One type of supplement does offer some basic help in these areas. Long-term care is very limited in Medicare. None of the supplements help in this area.
There are major concerns about Medicare’s Hospital Insurance Trust Fund, which pays for Part A. It will run out of money in only five years from now. You paid into this your entire working life through payroll taxes. The other parts of Medicare are paid for from other sources, including general tax revenues. Medicare covers approximately 21% of the national health care spending. It accounts for 12% of the overall federal budget. With all of these challenges, any talk of expanding Medicare or starting Medicare for all are probably unrealistic. If you have a spending problem at home, you do not fix it by buying more.
Everyday 10,000 more Americans turn 65, putting more strain on both Medicare and Social Security. But baby boomers supported several generations of older workers with their tax payments. Now it is important for bipartisan support in Washington to get the budget under control and protect the benefits of all our seniors.
Happy birthday, Medicare. We are fortunate to have you.
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.