How Does Medicare Work? 7 FAQs About Benefits

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For most workers, retirement means an end to employer-sponsored health coverage. But your 65th birthday usually comes with a pretty sweet gift from the federal government: Medicare.

But how does Medicare work, anyway?

Whether you’re about to turn 65 or you’ve been enrolled in the program for years, now is a great time to brush up on the federal health insurance program, what it offers, what it costs and how to make changes to your Medicare coverage.

7 FAQs About Medicare and Open Enrollment

Medicare is the largest health insurance program in the United States, covering more than 60 million Americans.

It’s also one of the most confusing and complex programs.

Contrary to popular belief, Medicare isn’t free and it doesn’t cover all your health care costs either.

Here’s what you need to know to get the most out of your Medicare coverage.

1. What is Medicare?

Medicare is the federal government’s health program for people age 65 and older, as well as some younger people with disabilities or kidney failure.

If you’re at least 65 years old and entitled to Social Security benefits or Railroad Retirement benefits, you’re eligible for Medicare. You don’t need to be retired or taking benefits to qualify.

Younger people who have been on Social Security Disability for at least 24 months, or have been diagnosed with end-stage renal disease or ALS are also eligible.

2. How Is Medicare Funded?

Medicare is funded via payroll taxesalso known as FICA taxes, which are automatically withheld by your employer.

FICA includes a 6.2% Social Security tax and a 1.45% Medicare tax on your earnings — or 7.65% total.

Self-employed people face a double whammy from the federal government because they pay both the employer’s and the employee’s share of FICA taxes — a total of 15.3%.

No matter how much you make, 1.45% of your paycheck will be withheld for Medicare.

An additional 0.9% Medicare tax may apply to earnings over $200,000 for single…

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