Medicare was signed into law by President Lyndon B. Johnson in 1965. The program was designed to provide insurance coverage of hospital expenses through Part A, and of medical costs through Part B. Medicare covers senior citizens aged 65 and older and younger individuals with specific disabilities. Medicare is available for legal permanent residents that have met the qualifying number of years worked. Those eligibilities remain in effect today.
If someone retires at the age of 62, without any of the qualifying disabilities, they will not be eligible for Medicare until the age of 65. If someone retires without a continuing employer-provided health insurance plan, they will need to purchase an individual or family health plan that will meet their medical expectations until reaching the qualifying age of 65.
Medicare Coverage Due to Disease or Disability
Immediate eligibility for Medicare insurance is available for people under the age of 65 with ALS, commonly referred to as Lou Gehrig’s disease, and for those with end-stage renal disease, or kidney failure.
Individuals under the age of 65 that are receiving Social Security Disability Income or Railroad Retirement Board Disability income have a two year, sliding scale, waiting period to qualify for Medicare insurance beginning at age 62. As an example, someone who started receiving disability income at age 60 will be eligible for Medicare at age 62. Another example is someone who started receiving disability income at age 62 will become eligible for Medicare at age 64.
Cost of Medicare
Medicare Part A
Individuals are provided premium-free Medicare Part A Hospital Insurance if the individual or a spouse paid the payroll Medicare tax for a defined period of time while working. If someone does not qualify for the premium-free Part A, they may be able to purchase Part A for a monthly premium, which is subject to change. Depending on the number of quarters worked, the monthly premiums can range from $252 a month for an individual who have worked 30 to 39 quarters, and up to $458 a month for an individual who worked less than 30 quarters.
Medicare Part B
The cost of coverage by the Medicare health care program is calculated by the Centers for Medicare & Medicaid Services based on your last two years of taxable income as reported by the IRS. The monthly premiums for Medicare Part B are subject to change from one year to another. There is a standard monthly premium. If an individual’s modified adjusted gross income exceeds the standard income bracket, that person will pay an extra charge for Part B that is calculated on the amount of the additional income.
The income basis for Part B premiums allows for individual and family programs. For example, an individual with annual earnings of $87,000 or less and a married couple with annual earnings of $174,000 or less will have the same monthly premium cost of $144.60. The monthly premiums with the extra fees will increase at various levels based on the higher income of individuals or couples up to a maximum monthly premium of $491.60.
Paying for Medicare and Social Security
Social Security Recipients
Retired individuals aged 65 and older who are receiving Social Security income will see their Medicare premiums automatically deducted from their monthly statements.
Retirement Income without Social Security
Retired seniors aged 65 and older who have monthly pensions or other forms of income not related to Social Security benefits who choose to purchase Part A and/or Part B will be billed monthly for those premiums.