What is Medicare and How Does It Work?
Medicare is a federally-regulated health insurance program that provides healthcare treatments and services to people who are aged 65 and older, or those with certain disabilities. Medicare is only available for U.S. citizens and permanent residents of the United States.
If you are a U.S. citizen and are enrolled in Medicare, you will have access to a unique set of healthcare benefits. These benefits are segmented into a few different parts — Parts A, B, C, and D — and may vary based on where you live.
The various parts of Medicare are responsible for the following aspects of healthcare services:
Medicare Part A
Known as one of the two parts of what is called “Original Medicare”, Medicare Part A primarily acts as hospital insurance. Specifically, Medicare Part A covers treatment received in a hospital setting, including scenarios like inpatient surgery and nursing care. It also covers other home health services and emergency medical services in certain scenarios.
Medicare Part B
Known as the other half of Original Medicare, Medicare Part B typically acts as medical insurance. Medicare Part B covers elements like treatment received at a doctor’s office, medical equipment needs, and outpatient surgery.
Medicare Part B covers a variety of services that are typically provided by medical professionals such as physicians and nurse practitioners, though many hospitals provide their own coverage for this benefit.
Medicare Part C
Also known as Medicare Advantage, Medicare Part C combines the various services that are commonly provided in a hospital with the medical services that are also covered under Part B. However, this coverage may include more advanced benefits that Original Medicare (Parts A and B) do not typically cover.
Medicare Advantage plans often cover factors such as eyeglasses, dentures, hearing aids, and many other needs that Original Medicare does not cover. The exact benefits that a Medicare Advantage plan may offer depends largely on the provider that offers the plan and the plan itself.
There exist many great resources that can help you and your loved ones fully explore and compare Medicare Advantage options that may be available in your area. One such resource is MedicareInsurance.com, who employ many experienced, friendly, and licensed agents for this exact purpose. They can be contacted by phone at (800) 950-0608 today!
Medicare Part D
Medicare Part D typically refers to prescription drug plans that are available for people who are already enrolled in the Part B and C plans. If they choose to enroll, this plan will allow them to fill their prescriptions at various pharmacies that Medicare approves.
Medicare Part D is another payment option for expanded health insurance needs. While many Medicare Advantage plans include Medicare Part D, it is also available as a standalone option for those who are already enrolled in Original Medicare.
How is Medicare Funded?
To the chagrin of many, Medicare is funded primarily by taxpayers. Regardless of whether you work for a company or are self-employed, you are required to pay taxes to support Medicare and Social Security programs. For those who are self-employed, this is known as the self-employment tax. For regular employees, it’s known as the FICA tax.
For most individuals, the IRS provides a flexible income tax credit of around 8.55 percent, which is equivalent to about half of the total tax paid for each pay period. Most Americans pay around 1.45 percent of their income into the Medicare program, while others pay a tax rate of around 2.35 percent each pay period. This combines both the regular Medicare employee tax, and an additional Medicare tax*.
*Only taxpayers earning over $200,000 per year are subject to the Additional Medicare tax.
Medicare tax rates are broken down as follows:
- Medicare Employee – 1.45 percent paid by employees and employers
- Additional Medicare – 0.9 percent paid by employees
The remaining 6.2 percent of FICA taxes paid by employees and employers takes the form of a tax that pays into the Social Security program.
Why Do I Have to Pay Medicare Tax? Isn’t it a Government Program?
Although no one likes paying extra taxes, they are necessary evil. The money collected from these taxes goes to various programs that help seniors get the healthcare they need to stay healthy and maintain their independence. Without these funds, the program would not be able to provide the necessary services to these seniors, and eventually, to every American citizen who has worked throughout their adult life.
All federal government programs are funded by the American taxpayer. This also includes the Social Security tax, which helps fund the retirement income that you’ll need once you retire. The FICA tax helps fund the living expenses and medical expenses of seniors, which (hopefully) we will all be one day.
Think of it this way: by paying the FICA tax, you’re investing in yourself and your future. Not only will this tax help you secure a steady income during your golden years, but it also allows you to pay for your medical expenses in the event that doing so yourself ever becomes difficult.
Medicare Taxes are Necessary for the Health and Happiness of All of Us
Medicare tax is a vital part of a senior citizen’s health and wellness. It can help you maintain a steady income and cover your medical expenses. Remember that Medicare is not a handout, it is essentially a healthcare right that a senior has qualified for throughout their entire working life as a productive member of society.
As the cost of prescription drugs and medical treatments rise, it’s important that you pay taxes to support the Medicare program. This ensures that those who are enrolled in it receive the help they need to pay for their medical bills. In the future, even you will be able to get more out of your dividends from the program simply by doing your part.
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