Social Security and Medicare are related. Many seniors begin receiving benefits from both at approximately the same time. However, they are two different programs administered by other federal agencies, which provide different benefits to older adults.
What Is Social Security?
Social Security was created to promote the economic security of Americans. It is administered by the Social Security Administration (SSA) and designed to pay continuing income to retired workers ages 65 and older. On August 14, 1935, after the Great Depression of the 1930s, President Franklin Delano Roosevelt signed the Social Security Act as part of his New Deal.
How Does Social Security Work?
Social Security benefits are designed to replace part of your earnings when you retire. The number of benefits you are entitled to receive is calculated based on your highest 35 years of earnings. While you are working and paying Social Security taxes, the money you pay into the program is not held in an account specifically for you. It is used to pay benefits to people who:
- Have already retired;
- Are dependents of beneficiaries;
- Are disabled; or
- Are survivors of deceased workers.
What Is Medicare?
Medicare is a federal health insurance program for people aged 65 or older. The Centers administer it for Medicare & Medicaid Services (CMS). Medicare has distinct parts that provide coverage for specific medical services:
- Part A (hospitalization): Part A covers inpatient hospital stays, nursing facility care, hospice care, and some home health care.
- Part B (medical insurance): This coverage is for outpatient medical services. Part B covers preventative care, doctor’s services, outpatient care, and medical supplies.
- Part D (prescription drugs): Medicare Part D helps cover the cost of prescription medications, including recommended vaccines.
- Part C pertains to Medicare Advantage Plans, an option eligible individuals can choose as an alternative to Original Medicare.
How Does Medicare Work?
You can sign up for Medicare during your initial enrollment period, which begins three months before you turn 65, includes the month you turn 65 and ends three months after you turn 65. When you enroll, you choose between Original Medicare and a Medicare Advantage Plan (under Part C). Either way, you pay a monthly premium for Medicare Part B coverage
Both options have certain advantages and disadvantages:
- With Original Medicare, you can go to any doctor or hospital in the U.S. that accepts Medicare, and you are eligible to purchase supplemental Medigap coverage. There is no cap on annual out-of-pocket expenses, so it is essential to have supplemental health insurance.
- With a Medicare Advantage Plan, you may be limited to providers within the plan’s network. Depending on the plan you choose, you may pay an additional premium. With a Part C plan, you are not eligible for Medigap insurance. However, these plans set annual out-of-pocket maximums. Unlike Original Medicare, a Medicare Advantage Plan will pay for 100% of covered medical services over and beyond the maximum out-of-pocket amount in any given year.
If you need assistance applying for Social Security benefits, enrolling in Medicare, or both, speak with our experienced agent. We are always happy to help.Filed Under: Medicare | Tagged With: Medicaid, Medicare, Medigap Insurance, Original Medicare