U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 02-18-2016, 08:44 AM
 
Location: NC
6,546 posts, read 7,961,421 times
Reputation: 13440

Advertisements

What exactly is the relationship between Medicare and Social Security? I am rather confused about where the funding for Medicare comes from, since SocSec and Medicare are meant to be different kinds of programs.

I see SS essentially as an insurance program for our old age living expenses. You get out according to what you put in, over your working lifetime, with a correction formula that somewhat favors the low-income earners (who usually rely on SS the most).

Meanwhile, Medicare seems to be a medical support program with an entirely different set of rules in that your current payments are controlled by your recent 'income', no matter if it comes from a job, investments, sale of real property etc.

So if you save your whole life to have a decent retirement income, when it comes to using that income after your reach 65, you are heavily taxed on it for your medical care. Why should that be? If funding for Medicare is related to our savings via SS, and if Medicare is having trouble paying its expenses, why not just expect us to save a couple dollars a month out of our weekly paycheck over our entire working life (increase the SS contribution a tiny bit), rather than expecting certain senior citizens to foot the bill when they can no longer work? It makes no sense to me.
Reply With Quote Quick reply to this message

 
Old 02-18-2016, 01:58 PM
 
Location: Ohio
19,875 posts, read 14,221,081 times
Reputation: 16075
Quote:
Originally Posted by luv4horses View Post
What exactly is the relationship between Medicare and Social Security?
There is no relationship between the two.

Quote:
Originally Posted by luv4horses View Post
I am rather confused about where the funding for Medicare comes from, since SocSec and Medicare are meant to be different kinds of programs.
The funding for each comes from a payroll tax.

The payroll tax for Social Security is 6.2% each for employer and employee, while the payroll tax for Medicare is 1.45% each for employer and employee.

The taxes collected are paid out monthly.

If there is a surplus of taxes collected, the surplus goes into a separate Trust Fund for each.

If there is no surplus then money is drawn from the trust funds. For example in December 2015, Social Security came up $17 Billion short, so money was taken from the trust fund.

Quote:
Originally Posted by luv4horses View Post
I see SS essentially as an insurance program for our old age living expenses.
That is exactly right.

You are supposed to have an employer-based plan, plus your own savings plan.

In the event none or few of your employers had a plan, or in the event your own life circumstances were such that you had no savings or personal investments, you had Old Age and Survivor's Insurance...OASI.

Quote:
Originally Posted by luv4horses View Post
You get out according to what you put in, over your working lifetime, with a correction formula that somewhat favors the low-income earners (who usually rely on SS the most).
That is incorrect. Your monthly benefit is based on your highest monthly earnings over a period of 35 years, not what you paid in.

Quote:
Originally Posted by luv4horses View Post
Meanwhile, Medicare seems to be a medical support program with an entirely different set of rules in that your current payments are controlled by your recent 'income', no matter if it comes from a job, investments, sale of real property etc.
Medicare is the result of government interference in the healthcare system.

Policy decisions, rules, regulations and laws enacted by the federal government as well as State governments coerced everyone into employer sponsored group plans.

People still had access to healthcare as a result of the Hill-Burton Act of 1946 under which hospitals agreed to provide free care to anyone who needed it, in return for government grants and loans.

The final nail in the coffin was the 1949 In Re: Inland Steel Supreme Court decision.

Several other government policies, including changes to the 1954 IRS Tax Code decoupled catastrophic care from group life-insurance policies, creating an entire group of people without access to health insurance.

That was partially resolved when the majority of the elderly were covered by the Kerr-Mills Medical Assistance for the Aged Act, which had been enacted in 1960 --- a full 5 years before Medicare.


The best course of action would have been for government to reverse its policies and rescind its laws to decouple health insurance from employer-based plans.


That would have created in-State group plans and paved the way for universal health insurance.

Quote:
Originally Posted by luv4horses View Post
So if you save your whole life to have a decent retirement income, when it comes to using that income after your reach 65, you are heavily taxed on it for your medical care. Why should that be?

Medicare is means-tested just like Social Security is now means-tested. Your Social Security income is taxable under certain conditions. For example, in December 2015, the government collected $16 Million in taxes by means-testing Social Security.


Quote:
Originally Posted by luv4horses View Post
So if you save your whole life to have a decent retirement income, when it comes to using that income after your reach 65, you are heavily taxed on it for your medical care. Why should that be?

It's a form of means-testing designed to help keep Medicare solvent over the long-term.





Quote:
Originally Posted by luv4horses View Post
If funding for Medicare is related to our savings via SS, and if Medicare is having trouble paying its expenses, why not just expect us to save a couple dollars a month out of our weekly paycheck over our entire working life (increase the SS contribution a tiny bit), rather than expecting certain senior citizens to foot the bill when they can no longer work? It makes no sense to me.
Again, the two aren't related.

It requires raising taxes to save Medicare and Social Security, but raising taxes is both unpopular and dangerous (it will cause a short term recession sort of like the Clinton Recession). The HI (Medicare) tax rate was last raised in 1987.

When Medicare was first established, the cost-projections all failed, since no one foresaw the role of technology in medical care until much later. Note that Medicare only collected $241 Billion in taxes in 2015, yet Medicare spending grew 5.5% to $618.7 billion in 2014, or 20 percent of total NHE.
Reply With Quote Quick reply to this message
 
Old 02-18-2016, 02:36 PM
 
Location: NC
6,546 posts, read 7,961,421 times
Reputation: 13440
Wow, thanks for a very complete answer. But (there is that but again) if SS is means tested, then why do I know years in advance what my projected benefit will be? For Medicare, a couple of us have mentioned how a single event, such as sale of property or rights has meant that we suddenly receive a high medicare tax. Not just a few percentage points more, but in these cases a rate of 300% of the usual. With SS the remedy could also be to increase the FRA a couple months or whatever, but from what you wrote that cannot happen with Medicare since they need the money NOW. Then why not raise everyone's premium a dollar rather than hit the retired elderly, who have one good year financially, with the entire shortfall. I guess I am ranting, but it doesn't sit well with me.
Reply With Quote Quick reply to this message
 
Old 02-18-2016, 09:00 PM
 
13,874 posts, read 7,386,288 times
Reputation: 25351
Your Social Security benefit is not means tested. You get the same benefit regardless of whether you earn a million dollars that year as if you have no other income at all. The tax treatment changes based on your income. If you don't have other income, your Social Security check is not taxed. If you have some income, you pay tax on half your Social Security check. If you have a bit higher income, you pay tax on 85% of your Social Security check.

Also, the health coverage you receive under Medicare is not means tested. The monthly premiums you pay vary depending on your income. If you have nothing coming in but a small Social Security check, you don't pay much of anything in Medicare premiums. If you earn 6 figures, Medicare and supplemental coverage will cost you about $7,000.

It is hard to say how any of this will work 20 years from now. The law will certainly change but there is no telling how.
Reply With Quote Quick reply to this message
 
Old 02-18-2016, 09:33 PM
 
10,812 posts, read 8,056,502 times
Reputation: 17010
Quote:
Originally Posted by GeoffD View Post
If you earn 6 figures, Medicare and supplemental coverage will cost you about $7,000.
Say WHAT? How are you getting that?
DH & I between us have a 6-figure retirement income and our Medicare premiums combined are in the neighborhood of $380-$420 a month. (He's sleeping now so don't want to disturb him to ask him the exact amount).
It's a steal.
Reply With Quote Quick reply to this message
 
Old 02-18-2016, 10:20 PM
 
Location: Wisconsin
21,534 posts, read 43,972,276 times
Reputation: 15135
Quote:
Originally Posted by biscuitmom View Post
Quote:
Originally Posted by GeoffD View Post
If you earn 6 figures, Medicare and supplemental coverage will cost you about $7,000. no telling how.
Say WHAT? How are you getting that?

DH & I between us have a 6-figure retirement income and our Medicare premiums combined are in the neighborhood of $380-$420 a month.
It's a steal.
Medicare in and of itself IS a steal.

What Geoff means is a couple will usually pay, at minimum:
$350 = Medigap F Premiums ($175x2) roughly, varies by age and location
$210 = Medicare Part B Premiums ($105x2)
$100 = Medicare Part D ($50x2)
$660 x 12 = $7,980/year

Now, if one's income exceeds the thresholds, the Part B premium can rise dramatically. My sister, a retired RN - because of excessive IRA withdrawals in 2014 - this year is paying $170/mo. just for Part B - plus $150 for a Medigap F, plus $50 for drug insurance, not to mention another $4k a year for medication - she always falls into the doughnut hole. Now, she doesn't do any tax planning. I caution her continually about the tax ramifications of IRA withdrawals and that she needs to do tax planning, but she's kind of an airhead on that issue. I think she's finally beginning to see the light b/c of the $170 Part B premium

Last edited by Ariadne22; 02-18-2016 at 10:38 PM..
Reply With Quote Quick reply to this message
 
Old 02-18-2016, 11:07 PM
 
10,812 posts, read 8,056,502 times
Reputation: 17010
Quote:
Originally Posted by Ariadne22 View Post
What Geoff means is a couple will usually pay, at minimum:
$350 = Medigap F Premiums ($175x2) roughly, varies by age and location
$210 = Medicare Part B Premiums ($105x2)
$100 = Medicare Part D ($50x2)
$660 x 12 = $7,980/year
That's irrelevant in this thread.. x2, say what? That would equate to $3500, not the $7k that chaps the OP.
Medigap is an entirely separate issue. If you want to talk about Medigap, it's equally relevant to bring up medicare advantage plans, which turn your calculations topsy-turvy.
Reply With Quote Quick reply to this message
 
Old 02-18-2016, 11:35 PM
 
Location: Living rent free in your head
30,994 posts, read 13,564,601 times
Reputation: 22079
Quote:
Originally Posted by Ariadne22 View Post
Medicare in and of itself IS a steal.

What Geoff means is a couple will usually pay, at minimum:
$350 = Medigap F Premiums ($175x2) roughly, varies by age and location
$210 = Medicare Part B Premiums ($105x2)
$100 = Medicare Part D ($50x2)
$660 x 12 = $7,980/year

Now, if one's income exceeds the thresholds, the Part B premium can rise dramatically. My sister, a retired RN - because of excessive IRA withdrawals in 2014 - this year is paying $170/mo. just for Part B - plus $150 for a Medigap F, plus $50 for drug insurance, not to mention another $4k a year for medication - she always falls into the doughnut hole. Now, she doesn't do any tax planning. I caution her continually about the tax ramifications of IRA withdrawals and that she needs to do tax planning, but she's kind of an airhead on that issue. I think she's finally beginning to see the light b/c of the $170 Part B premium
Or they would pay nothing more than their part B premium and get a medicare advantage plan. The one my husband has is amazing it covers everything no charge for generic drugs and a $6 co-pay for doctor's visits, with no premium.
Reply With Quote Quick reply to this message
 
Old 02-18-2016, 11:42 PM
 
Location: Living rent free in your head
30,994 posts, read 13,564,601 times
Reputation: 22079
It's not that hard to get the right information on this:

Individuals with a MAGI of $85,000 or less Married couples with a MAGI of $170,000 or less 2015 standard premium=$104.90

Individuals with a MAGI above $85,000 up to $107,000 Married couples with a MAGI above $170,000 up to $214,000
Standard premium + $42.00

Individuals with a MAGI above $107,000 up to $160,000 Married couples with a MAGI above $214,000 up to $320,000
Standard premium + $104.90

Individuals with a MAGI above $160,000 up to $214,000 Married couples with a MAGI above $320,000 up to $428,000
Standard premium + $167.80

Individuals with a MAGI above $214,000 Married couples with a MAGI above $428,000 Standard premium + $230.80

https://www.ssa.gov/pubs/EN-05-10536.pdf
Reply With Quote Quick reply to this message
 
Old 02-19-2016, 02:44 AM
 
71,470 posts, read 71,652,652 times
Reputation: 49042
Quote:
Originally Posted by 2sleepy View Post
Or they would pay nothing more than their part B premium and get a medicare advantage plan. The one my husband has is amazing it covers everything no charge for generic drugs and a $6 co-pay for doctor's visits, with no premium.
advantage plans are good until they are not . they are basically pay as you go and can have loads of costs .

i mentioned how my buddy bragged about how little his advantage plan cost until his wife needed chemo and found out he has a 4500 co-pay .

plus the caps on out of pockets are based on what the plan would have paid for . many things would have no coverage at all or they would pay little . they don't count towards that cap .

also rehab care is very limited on most advantage plans .

all in all you really don't know what your medical costs will be as nothing is ever a problem until it is a problem .

what your states policy is and whether age based or community based effects your costs on medigap greatly .

in ny an f-pan is 3300 , medicare if no surcharge is 1260.00 and a drug plan 350 or so . that is quite a lot of dough .

we took a high deductible f-plan for about 900 a year and a 2k deductible .


but we are also paying almost 4700.00 for medicare alone this year because we got hit with a 300% increase to 389.50 a month because of income in 2014 .
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top