About 10,000 Americans turn 65 every day. Many may quickly leave the workforce and claim the benefits of Medicare, which they believe they are eligible for, after paying the Medicare tax on the workforce for decades.
But they may be looking for a rude awakening. Even after paying tens of thousands or hundreds of thousands of dollars in Medicare tax over years of service, beneficiaries spend thousands of dollars more each year on retirement compensation.
The coverage does not always guarantee timely access to doctors and professionals they may want to see. It’s no wonder that older people are increasingly choosing a privately managed Medicare Advantage plan that often offers more value than traditional government-managed Medicare programs.
People start paying for Medicare long before they get older. To fund certain parts of the program, the government imposes a 2.9% payroll tax.
The money will be added up. According to the Urban Institute, individuals in their mid-twenties who currently earn less than $ 23,400 a year will pay $ 60,000 in Medicare tax by the age of 65. If the same individual earns $ 83,000 each year for a lifetime, he will pay $ 220,000. Total Medicare tax.
In a new survey, nearly 60% of respondents reported that they were unaware that Medicare premiums vary by plan and income. I didn’t know that at about the same rate, there are different deductions for hospital care, outpatient care, and Medicare, which covers prescription drugs.
Part A deductions covering hospitals and hospitalization services are $ 1,556 this year. Part B deductions covering outpatient consultations are $ 233. And the maximum deduction for Part D, Medicare’s prescription drug benefit, is $ 480 this year.
This means older people can pay more than $ 2,000 from their pockets, in addition to the thousands that Medicare may already be spending on insurance premiums, depending on their income, before they start paying for long-term care.
According to a Fidelity Investments report, the average Medicare couple will need $ 300,000 to cover their retirement benefits. However, the estimate only considers the out-of-pocket costs of Medicare Parts A, B, and D, not the costs of other health-related services not covered by the government.
To help older people cover their out-of-pocket costs, the government recommends purchasing a Medigap plan. However, these supplemental insurance plans can cost an additional $ 300 each month.
Most older people do not have enough savings to cover these costs. According to the Fidelity Report, half of the workers who spend their time thinking about layoff costs think they need less than $ 50,000 to pay for their health care. Not surprisingly, more than one in ten Medicare beneficiaries delay care because they cannot afford it.
Medicare is not free. People who are approaching or are retiring need to be prepared for that reality.
Sally C. Pipes is President and CEO of the Pacific Research Institute and Thomas W. Smith Fellow of the Health Care Policy. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @ sallypipes. This work was originally run at Inside Sources.
