Medicare vs. Social Security

Medicare and Social Security have several things in common since they are both federally funded insurance programs that provide assistance to similar groups of people.

Most people who are on Medicare also receive Social Security benefits. But some people may be enrolled in one program, but not the other.

The most notable cross over between Medicare and Social Security is that you have to enroll in Medicare through the Social Security Administration. This causes some confusion — leading people to believe that they are the same.

But once you enroll, all your Medicare services are handled through the Centers for Medicare and Medicaid Services. All your Social Security services are handled by the Social Security Administration. These are distinctly different federal agencies with different missions.

The biggest difference between Social Security and Medicare is that Social Security provides financial assistance that can be used to cover cost of living expenses for retirees and people with disabilities while Medicare helps cover health care costs.

In short, Medicare provides medical and hospital insurance to help cover health care bills. Social Security provides you with a source of income when you retire or cannot work due to certain conditions or situations.

Medicare and Social Security have different eligibility requirements — but some of them are linked. You’ll need to understand some of the basics of Medicare and of Social Security before signing up. But you’ll need to sign up for both separately.

You sign up for both Social Security and Medicare through the Social Security Administration. You can apply online or by telephone. Office visits were curtailed as a result of the COVID-19 pandemic but you can check with the Social Security Administration to request an in-person visit.

You can sign up for Social Security benefits if you are 62 or older, disabled or blind — and have enough work credits.

Work credits are based on how long you have worked — and paid Social Security taxes — and on how much you earned at your job. You earn up to four work credits per year — up to a maximum of 40 credits after 10 years of work.

Even though you are eligible for Social Security benefits at age 62, you will only receive a percentage of them until you turn 67 and waiting until you are older means your Social Security benefits will be higher each month. This can make a difference of several thousand dollars per year.

You may be eligible for Medicare if you are 65 or older and have certain disabilities or medical conditions or if you are younger than 65 but have disabilities, ALS or End-Stage Renal Disease.

Medicare has an eligibility and premium calculator on its website to help you determine if you meet eligibility requirements and how much your Medicare Part A and Part B premiums will be.

Most people don’t have to pay Part A premiums. You should only have to pay Part A premiums if you or your spouse have not paid Medicare taxes for at least 10 years.

Everyone who opts for Part B premiums is required to pay for them. Your Medicare Part B premiums are deducted from your Social Security, Railroad Retirement or Civil Service Retirement check each month. If you are not receiving any of these payments, you’ll get a bill for your Part B premiums every three months.

Medicare and Social Security are both paid for through payroll taxes withheld from your paycheck — but Medicare also receives funding from other sources. You can see how much you pay by looking at the Social Security and Medicare withholding lines on your pay stub.

The Social Security tax is 6.2% of your gross wages. The Medicare tax is 1.45% of your gross wages. Your employer matches this amount as well. The total rate for both is 15.30% if you are self-employed. You do not pay Social Security taxes on income over $147,000.

Medicare also receives funding from other sources including income taxes paid on your Social Security benefits, interest paid on investments made by the Medicare Trust Fund, premiums paid on Medicare Parts A and B, and other funds Congress authorizes.

Both Medicare and Social Security deposit some of the funds they collect into multiple trust funds.

Your taxes and money from other funding sources go into two Medicare trust funds — the Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund. Both funds are held by the U.S. Treasury.

Some of the money in each trust fund also pays for the costs of administering the Medicare program.

Social Security then issues payments to beneficiaries from one of these two funds.

The Social Security trust funds can only be used to pay benefits to people on Social Security or the programs’ administrative costs.

If there is money left over in the trust funds at the end of the year, the law requires Social Security to invest it in special Treasury bonds guaranteed by the federal government. When they reach maturity, the money — and interest earned on it — are redeemed and returned to the trust funds.