When you pay FICA or self-employment taxes, it can seem like the money is going into a black hole, but you are actually paying into Medicare and Social Security. Each year, you can earn as many as four retirement credits, and in 2020, you get one credit for every $1410 that you earn.
After you have a total of 40 credits to your name, you will qualify for Medicare when you reach the age of 65. And even if you never worked, if your spouse has accumulated the 40 credits, you would qualify for Medicare on their record.
You should have a firm understanding of what you can expect from Medicare when you are budgeting for your retirement years. It is reasonably solid coverage, but there are significant costs that you have to pay yourself.
In addition to these out-of-pocket expenses, there is a gaping hole in the coverage that everyone should be well aware of, and we will provide all the details in this post.
Medicare Part A
There are four sections to the Medicare program, and the first one is Part A. This is the portion that pays for hospitalization, and there is no monthly premium for most people. The deductible is $1408 for every benefit period.
All of the numbers that we are sharing here are for 2020, but there are annual adjustments to account for inflation, so they will be a bit different next year.
If you have to stay in the hospital for an extended period of time, you must pay coinsurance depending on the length of the stay. For days 61 through 90, the coinsurance is $352 a day, and there is a $704 daily coinsurance for days 91 and beyond.
Medicare Part B
This is the section that pays for visits to doctors. There is a monthly premium for this coverage, and it stands at $144.60 this year. The deductible is $198. After this has been met, Medicare will pay 80 percent of the bills that you incur, and you are responsible for the rest.
Medicare Part C
You have the option of using your Medicare benefit to go toward the cost of private insurance that would be more comprehensive in nature. This is called Part C.
Medicare Part D
The last section of the coverage is Part D, which is the prescription drug component. You have options with regard to which plan you choose, and you have to pay premiums, coinsurance, and deductibles.
Medicare is supposed to provide a health insurance safety net for seniors, so you would expect it to pay for medical related costs that elders incur. About one third of seniors will ultimately reside in nursing homes, and 70 percent of them will require some type of living assistance.
Surely Medicare will pay for this type of care since so many people that are enrolled in the program will need it, right? A lot of people would say that it’s not fair, but in fact, Medicare does not pay for help with your activities of daily living unless it is convalescent care.
The solution for many people is Medicaid, but of course, it is only available to people with limited resources. You could give assets to loved ones so you can gain eligibility, but you have to complete all gift giving at least five years before you apply.
If you take the right steps at the right times, you can make sure that you are comfortable throughout your life, and if you need long-term care, Medicaid eligibility will be available.
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We are here to help if you would like to discuss future long-term care costs or any other matter with an elder law and estate planning attorney. You can send us a message to request a consultation appointment, and we can be reached by phone at 802-879-7133.