The importance of Medicare Part A and B in retirement
Health Benefits Report
One of the few things that is (almost) uniform in our profession is that we are (almost) all enrolled in Medicare. That stands if you are paying Social Security from your employer or not. While there may be some people who started before this requirement and are still not paying a Medicare tax, there is no exemption for anyone hired after March 31, 1986.
Medicare was created through legislation signed into law by president Lyndon B. Johnson as part of the Great Society movement in the 1960s, which grew out of his war on poverty. This would allow Americans in their golden years to be assured medical coverage of some sort.
There is a great deal of confusion among our members when it comes to their eligibility for Medicare and what parts A and B are. Hopefully this article will help.
By way of definition, Part A is for the qualified person’s hospitalization, and B is for the physicians. With no additional supplement, the member will have deductibles that can be severe financial burdens.
Throughout your working career, you are required to pay a Medicare tax through payroll, even if your employer is exempt from Social Security. The Medicare portion of the Social Security tax is 1.45 percent on the first $200,000 in wages and 2.35 percent on wages in excess of $200,000. If you are enrolled for 30 quarters, you are eligible for Part A at no additional cost at age 65; if not, you may pay up to $499 a month to be enrolled. Part B will cost qualified members approximately $148 per month (more if you are a higher earner).
For all retirees in the State Health Benefits Plan and most in other employer plans, the member is required to be enrolled upon eligibility or their benefits are suspended. This is why it is so important for you to enroll at least six months before your 65th birthday.
The reason for this is that when Medicare is involved, it controls premiums for the plans as the federal government absorbs a large part of the costs. Unfortunately, many employers hide behind this SHBP regulation in order to force the members to take on part of their retiree healthcare costs. Many employers have adopted chapter 48 or 88 or have contractual language that requires reimbursement for their out-of-pocket payments to Medicare.
Please review your retiree health benefit clauses in your contract to see exactly what costs to expect in retirement.