Many looking towards their future may be curious as to what the differences in Social Security vs Medicare are. We are more than happy to explain the differences between these programs and their respective benefits. While both are social benefit programs, they cover different aspects of life that together can be used to help you live a healthier and more (financially) comfortable life during your golden years.
Social Security vs. Medicare: Key Takeaways
- Social Security and Medicare are two comparable federal benefit programs.
- Medicare is a joint federal and state government program that provides low-cost health coverage to retired seniors.
- Social Security is a federally-run program that offers retirement and survivor benefits as well as disability income.
- While different, Social Security and Medicare can be used in conjunction to provide qualifying recipients with various benefits.
What is Medicare?
Medicare is a joint federal and state government program that provides free or low-cost health insurance to many retired seniors. The federal government subsidizes a portion of funding and sets some guidelines, while states set up their funding and rules. Medicare has four main parts: Part A, B, C, and D.
Medicare Part A
Part A (Hospital Insurance) covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some at-home health care. It’s important to note that this coverage does not extend to long-term or custodial care in these kinds of facilities. Generally, this program is free after enrollment and requires an application.
Medicare Part B
Medicare Part B (Medical Insurance) covers some doctor’s visits, outpatient care, medical supplies, and preventative services. This serves to cover most medically necessary services like annual checkups, laboratory services, and others not covered with Part A alone. Part B has an annual premium that members pay when they join. As of 2015, the annual premium was $104.90 with a deductible of $147. Once seniors are eligible to claim Social Security, they can enroll in Part B.
What is Medicare Advantage?
Medical Advantage is what people call Medicare Part C. In this program, people can buy government-subsidized health insurance policies through private companies that can, at times, provide better coverage than Medicare Part A and B alone. To be eligible, enrollment in Medicare Part A and Part B is necessary. The price of such a plan will vary state to state and coverage will vary between policies. To pick the best-tailored policy, note what one requires from their coverage. It is important to note that although a Medicare Advantage Plan may have different rules, as stated by Medicare, “your plan must give you at least the same coverage as Original Medicare.”
Medicare Part D
Medicare Part D is a prescription-drug coverage policy. It’s an addition to Original Medicare, some Medicare cost plans, some Medicare private-fee-for-services plans, and Medicare medical savings account plans. Only different Medicare-approved insurance companies offer Medicare Part D plans. This program is optional for those with Medicare and helps those concerned with covering the rising cost of prescription drugs. It can be added to existing Medicare or Medicare Advantage plans.
Eligibility For Medicare
People who are 65 or older, along with younger people with disabilities all qualify for Medicare. Those with End-Stage Renal Disease (ESRD) are also eligible. Those age 65 or older who have, or have a spouse who has, worked and paid Medicare taxes for at least 10 years or those receiving retirement benefits from Social Security are eligible for premium-free Part A. Others may have to pay a premium for Part A, but everyone has to pay a premium for Part B if they wish to purchase it.
What is Social Security?
Social Security is how most people refer to the Old-Age, Survivors, and Disability Insurance (OASDI) program run by the federal Social Security Administration. This program offers various benefits like retirement benefits and survivor benefits, as well as disability income. Social Security is a pay-as-you-go program, meaning that, unlike pre-funded company pensions, today’s workers pay Social Security taxes in and that money flows out as monthly benefits for beneficiaries.
After having paid into the Social Security system for a minimum of 10 years, planning when to retire is a strategic move. For those seeking early retirement, benefits can begin at the age of 62. The longer people postpone their retirement, the higher their monthly benefit can be – Up to a maximum of 70 years of age. A worker’s average indexed monthly earnings (AIME) during their 35 highest-earning years determines benefits. The children of these retirees can also receive benefits up to their 18th birthday, or longer in the case of disability or being a student. Additionally, spouses can also claim benefits off their retiree spouse. This also applies to divorced spouses as long as their marriage lasted at least 10 years.
Disability benefits are for those that cannot work due to a physical or mental disability that is estimated to last for a minimum of a year. These benefits are also extended to those that cannot work due to a terminal condition. Eligibility is not always certain and there are certain steps and checklists that must be taken into account first. Those seeking to qualify usually have to meet certain earnings tests, like work credits. For example, they must have first recently worked in a job covered by Social Security. These benefits also do extend to some family members.
In the unfortunate death of a worker, their spouse and children may be eligible for survivor benefits based on the worker’s past earnings record. Qualifying requirements include spouses who are 60 years or older, as well as those 50 years or older and disabled as long as they have not remarried. Spouses caring for a child younger than 16 or a child with a disability may also be eligible for coverage. Generally, children can also receive benefits as long as they are younger than 18 or have a disability. Eligibility for benefits for parents who happen to be 62 years or older and were dependents of the worker for at least half of their income may also be available.
Eligibility For Social Security
Each branch of benefits has its own eligibility requirements, but these are some general requirements. To qualify for Social Security retirement benefits, workers have to be at least 62 years old and must have paid into the system for at least 10 years. Spouses and ex-spouses to those that qualify may also be eligible based on the partner’s earnings. An applicant’s disability must be well-documented and listed on the program’s eligible conditions list in order to qualify.
How Do Social Security and Medicare Work Together?
Now, these two federal programs may be different but they do intertwine and affect each other. When comparing Social Security vs Medicare, it’s important to know how they work together. Both are individually funded by payroll taxes, provide benefits to eligible participants, and help people with certain disabilities. Social Security retiree benefits work to give monthly allowances to those that qualify. Medicare health insurance plans require enrollment and the payment of a monthly fee for coverage, depending on enrollment plans. The Social Security Administration handles enrollment in both these programs. Those who have paid social security taxes pay for their future retiree benefits and their Medicare Part A coverage. When receiving these benefits, those enrolled in Medicare Part B will likely have their premium taken from Social Security check. So, both Social Security and Medicare work together to simultaneously provide those who qualify with various benefits.