Social Security’s role in Medicare

Medicare Part A

Your Social Security work history determines whether you qualify for free premiums for Medicare Part A hospital insurance. People who work a total of 40 or more quarters at jobs where they pay Social Security payroll taxes qualify for Social Security benefits. If you don’t qualify, you could be asked to pay monthly premiums in excess of $500. In a little-known twist, people who must pay these premiums have the choice of getting their health insurance from one of the Affordable Care Act’s state exchanges and may not need to sign up for Medicare when they turn 65.

Medicare Parts B and D Premiums

Medicare Part B premiums must be subtracted from monthly Social Security payments. If you’ve not yet begun claiming Social Security, Medicare will bill you quarterly for Part B premiums. Most people also choose to have their premiums for Part D drug plans deducted from their Social Security payments.

IRMAA

This is the acronym for Social Security’s income-related monthly adjustment amount. About 8 percent of Medicare beneficiaries make enough money to trigger monthly premium surcharges for Parts B and D of Medicare. And just to make the pain a little more tortured, IRMAA is based on your tax returns of two years’ ago. These surcharges rise each year to reflect consumer price inflation. Here’s the link to 2024 surcharges.

Health Savings Accounts

Health savings accounts permit tax-deductible contributions, often include employer contributions and can be placed in investment accounts similar to 401(k)s. Better yet, funds spent on eligible medical expenses are not taxed either. And HSA balances can be carried over from year to year. Amidst all this good news about HSAs is one major downer: People on Medicare can’t participate in HSAs, even if they continue to be covered by employer provided health insurance plans. And in a major surprise to many people, anyone who receives Social Security payments must, by law, be enrolled in Part A of Medicare. This invalidates their continued participation in an HSA.

65 Doesn’t Mean What it Used To

Turning 65 used to be the logical time to sign up for both Social Security and Medicare. The full retirement age for Social Security used to be 65 — the same age that triggers eligibility for Medicare. Mandatory retirement at 65 also was common. Today, Social Security’s full retirement age is 66 and will be 67 for anyone born in 1960 or later. Social Security benefits don’t peak at 65, but at 70. Further, nearly a third of people in their late 60s are still in the workforce, and many say they will continue working — out of financial necessity or choice — until age 70 or beyond. The delinking of enrollment ages for Social Security and Medicare creates a more complicated set of decisions for both programs.