who pays for MedicareCategory:

Over the years, the process I use to introduce clients to Medicare and Medicare insurance has evolved. This evolution has been based on my personal and professional growth. The process has evolved chiefly because Medicare and insurance companies have evolved. Clients and their needs change and evolve as well. Paying for Medicare is one of those changes. So, how do Medicare payments work in 2024?

Delayed Social Security Benefits

More clients retire or take Social Security Benefits at full retirement age, which is at least 66 and 10 months. (Next year, full Social Security Benefits will be at age 67 for everyone, or 67 for those born in 1960 or later.) Medicare eligibility, however, remains at 65.  

Consequently, Medicare beneficiaries need a way to pay their Medicare Part B premium. In the past, the monthly Part B premium was deducted directly from a person’s Social Security check, but since most are delaying Social Security Benefits, you must pay a different way.  

Medicare Payment Options for 2024

There are four ways to make your Medicare Part B premium payment for 2024.   

1. You can pay by check quarterly through the mail upon receipt of your bill for Part B from Social Security. The SSA only accepts checks for quarterly payments.  
2. Pay online from your checking account monthly with an EFT (electronic funds transfer).   
3. Pay online by credit card monthly.
4. Pay by monthly deduction from your Social Security.

The place where your Medicare payments for 2024 occur is in your MyMedicare.gov online account.  

At the end of an enrollment appointment, I ask clients how they wish to pay their Medicare Part B premium if they are not getting Social Security benefits.  Most do not have a MyMedicare.gov account, so I set it up for them at the end of the meeting.  

Online Medicare Payment for 2024 Instructions

Here is how to do it.

• Type mymedicare.gov in the address bar of your browser. You’ll arrive at the login site.
• Click the green “Create Account” button on the right.  
• Fill out your protected health information (PHI). You must have a Medicare number to create an account.  
• Create your personal login information: user name, password, and security questions. Press the complete button, and voila—you have a Medicare online account.
• Click the green button on the left of “Pay my premium.”  
• Click the link “Set up reoccurring payments.”    
• Fill out your banking information. You are done.  

Your monthly 2024 Medicare Part B premium payments will be automatically deducted. With Medicare EasyPay, the SSA automatically deducts your monthly Medicare premiums from your checking or savings account. The statement includes the total SSA deductions for that month, which are itemized and broken down. Automatic deductions are generally made on the 20th of the month (or the next business day). 

The Medicare Part B premium payment does not include any other payments, such as your Medicare Supplement, Medicare Advantage, or Part D premiums. Those are handled separately.  

You do not need to do anything when the Part B premium increases. The withdrawal will be adjusted accordingly.  

When you start your Social Security Benefits, the Part B premium will automatically switch to your Social Security check and be withdrawn, and SSA will stop deducting from your personal checking account.  

No Forgiveness

Part B premium payment is critical. Over a decade with thousands of clients, I have only had a couple of clients forget to pay their Medicare Part B premium. The consequences were devastating. They lost their Medicare, resulting in penalties and lost health insurance. All medical bills came out of their pocket until they reactivated their Medicare insurance many months later. You cannot flip a switch and just turn Medicare back on. You must wait until General Medicare Enrollment Jan 1st-Mar 31st to reapply.  

As more people postpone taking Social Security Benefits until well past 65, I have made it part of our enrollment meeting to help clients set up their MyMedicare.gov account to pay their Part B premium out of their checking account. Setting up Medicare EasyPay is not difficult, but when I do it for them, I know it is done and done correctly. There is nothing worse than a distressed phone call from a client who has lost Medicare.  

Bottom Line: Don’t Miss Your Monthly Medicare Payment for 2024

Medicare insurance has many moving parts, and mistakes are unforgiven. At Omaha Insurance Solutions, we have helped thousands of clients over the years, so we know all that needs to be done for a

successful and happy retirement with Medicare health insurance. We will help you set up your 2024 Medicare Part B premium payments if you like.  Give us a call at 402-614-3389 to speak with a professional and experienced licensed insurance agent about your Medicare needs. We’ll make sure nothing is missed or forgotten.    

 

What is Medicare?

Medicare is under the Social Security Administration (SSA).  SSA is the bookkeeper for Medicare collecting premiums from Medicare beneficiaries and distributing funds to Medicare and insurance companies with Medicare contracts.  The Centers for Medicare & Medicaid Services (CMS) is the federal agency that manages the Medicare Program. CMS is under the Department of Health and Human Services (HHS).

So who pays for the Medicare bureaucracy?

In 2019, Medicare covered over 61.4 million people. Total expenditures in 2019 were $796.2 billion. A large portion comes from the Medicare Trust Funds, but how else is Medicare funded?

Who Pays For Medicare?

Medicare, like Social Security, is a “pay as you go” program funded each year by current taxpayers.  That means the current income taxpaying workforce is who pays into Medicare.

When workers’ ratio to retirees was much higher in past decades, there was little trouble meeting revenue needs.  With the vast baby boomer population going on Medicare each month, the number of workers is at a record low level compared to those on Medicare.

Other Sources of Medicare Funding

Medicare also has a trust fund.  The U.S. Treasury holds two accounts for Medicare: the Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund.  Medicare can only use these monies in the trust funds for Medicare operations.

Payroll Taxes Fund Medicare

I remember when I started working at 14.  I picked up my first paycheck.  Chuck Wagon Buffet on Center St. paid me $1.46 an hour for washing pots and pans in 1975.  While working, I would calculate how much I was making in my head. When my first payday arrived, I was excited.  I was expecting a specific amount of money.  In my mind, it was already wholly spent on useless teenage stuff.  When I got the check, my jaw dropped.  The amount was way lower than the amount, I figured.

I told my dad they had made a mistake.  He explained that the company took out the FICA (Federal Insurance Contribution Act) taxes for Social Security and Medicare. I was not a taxpayer who pays into Medicare.  I told him I wanted my money back.  He just laughed and told me I might see it back when I got older.

The Medicare tax is a percentage taken from your gross pay.  There is no opting out of the Medicare tax.  The more you make, the more you pay.  The employer is required to match the same percentage amount.  You pay 1.45% of your gross wages.  The employer himself matches 1.45% of your wages also.

Medicare and Obamacare

However, there is a difference between the Social Security and Medicare tax. The Social Security tax is higher.  It is 6.2% from the employee and 6.2% match from the employer.  Medicare is 1.45% for both the employee and employer.  The difference between Social Security and Medicare is that the Social Security tax ends at $145,000 in income.  Any income above the $145,000 mark is Social Security tax-free.  The Medicare 1.45% tax, is levied on all earned income, no matter how much.  There is no limit.  You keep paying the 1.45 even if you are making $500,000.  Your income will also affect your Medicare Part B premium.

Further, the government adds an 0.9% Medicare tax for incomes over $200,000 for a total of 2.35%.  Congress, with the Affordable Care Act (ACA), a.k.a Obamacare, in 2013 created this new tax.  FICA taxes accounted for 88% of Part A revenue in 2019.  The taxpaying worker is who pays for Medicare Part A.

Trust Fund Investments Do Little

A  source of income for the trust fund is the trust fund investments. However, the investment interest is not actual interest like in your savings account.

When receipts from taxes exceed the HI Trust Fund’s expenditures, the Treasury takes the cash and replaces it with IOUs.  The debt instruments are called Government Account Series (GAS) securities.  They are nonmarketable, and the US Treasury issues them.  Interagency transfers of funds are done with GASs.  The interest “earned” is the current interest rate on Treasury bonds and notes.  When the actual debt needs to be redeemed, the Treasury must go into the open market to sell US Treasuries to find the cash to cover the Trust fund’s GAS.  At the end of the fiscal year 2019, the trust funds held $5.2 trillion in such securities. The internal debt does not count toward the national debt, which is $28,000,000,000,000 and growing.

The Trust Fund investment interest is a tiny portion of the total trust funds.  The interest credited is an insignificant amount in relation to the whole budget.

Medicare Part A Premiums From Those Who Did Not Work Enough

Sometimes people are surprised that Medicare costs something.  They assume Medicare is free, especially since they paid for Medicare all their working lives.  I assure them that Medicare is “free”–the Part A for the hospital.  They, of course, thought the whole thing was free.

Medicare Part A, however, is not free for everyone.  For those who have worked less than 40 calendar quarters or ten years, Part A has a price.  Your Part A monthly premium will depend on how many years you or your spouse worked and paid FICA taxes in the U.S.  These people are those who pay for Medicare Part A with monthly premiums.

Paying the FICA is critical.  I have known some individuals who worked and earned income, but all of their earnings were not reported to Uncle Sam.  As a consequence, their Social Security is small.  They are not eligible for Medicare or must purchase Medicare Part A if they want health insurance past 65.

Persons getting Railroad Retirement benefits and some federal, state, and local employees fall into other categories.

 How Much Does Medicare Part A Cost?

For individuals or couples who worked between 30 and 39 quarters, which is 7.5 to 10 years, the premium is currently $240 per month.  For individuals or couples who worked less than 30 quarters, the Part A premium is $437 per month.

If you do not meet the criteria above, you will likely pay a monthly premium for Part A. Your monthly Part A premium will depend on how many years you or your spouse worked in any job you paid Social Security taxes in the U.S.

State Medicaid will probably pick up the premium cost for Part A and Part B for low-income individuals.  The Part A premiums paid to go toward the Medicare expenses.

Supplementary Medical Insurance (SMI) Trust Fund Is Not Much of a Source

The Supplemental Medical Insurance (SMI) Trust Fund supports two Medicare programs. Part B is for doctor and outpatient services as well as medical supplies.  Part D started in 2008.  It helps seniors with the cost of medications, especially expensive medications.  Both programs are voluntary.  Monthly premiums from beneficiaries and taxes from the general fund support the programs.

Those enrolled in Part B pay a monthly premium of $170.10 currently out of their Social Security check or paid directly to Social Security.  The premium payment options for Part D prescription drug plans are similar.  However, the Part B and Part D premiums do not cover most of the actual cost.  The general fund supports most of the funding, which is financed with income taxes, corporate taxes, and excise taxes.  Part B and D are not financed by FICA payroll taxes like Part A.

Interest Income

For example, in 2017, the federal government general fund paid $253 billion for the Part B expenses.  Part B premiums Medicare beneficiaries paid amounted to only $93 billion.  Part D revenue from the general fund was $68 billion.  Beneficiaries only paid $16 billion for their prescription drug plan premiums.  General tax revenues fund the vast majority of Medicare.

Medicare is truly a pay-as-you-go program.  There is no stockpile of cash accumulated over decades to cover the expenses.  As the ratio of taxpaying workers to beneficiaries declines, the program will experience significant strain.

The SMI Trust Fund itself has very little money reserves and supplies a small fraction of the Medicare budget through interest income.  The purpose of the fund is to aid in cash flow.  The real source of revenue for Medicare Part B and Part D is taxes.  The Part B and Part D premiums paid are a small percentage of the overall revenue.

Do You Have to Pay For Medicare Benefits?

Who pays for Medicare?  The answer is the tax payor.  The tax payor pays over a lifetime through FICA payroll taxes out of his monthly check.  He pays mostly through income tax that goes into the general fund.  He finally pays in the form of premiums to Medicare directly, Medigap premiums to private insurance companies, copays, and co-insurance to doctors and medical institutions.

That being said, who pays for Medicare begs how it will be paid in the future.  More and more of the burden for the cost of Medicare is falling on seniors in the form of insurance premiums and coinsurance.  The working taxpayer is paying less because there are fewer actively employed in relation to those who are receiving Medicare benefits.

The projects and public policies currently in place make that clear.  The curiosity that prompts someone to ask who pays for Medicare should lead to additional questions about how we will continue to pay and for what level of benefits.