5 Medicare Myths – The Truth About Medicare

When you turn 65, you are finally eligible for Medicare coverage. Unfortunately, understanding Medicare coverage is not as easy as getting to your 65th birthday. Medicare is one of those things that is always talked about but rarely completely understood. Because of this, many people have misconceptions and Medicare myths truly exist. One of these myths is that Medicare is broke.

Here are 5 Medicare Myths you should be aware of:

1. Medicare is broke 

Despite what you may have heard, Medicare is not broke, bankrupt, or whatever other word you want to use. Medicare hospital insurance had nearly $200 billion in reserves at the end of 2015, the most recent year for which finalized data is available. And, substantially all of the program’s costs were covered by the payroll taxes collected from American workers. What’s more, Medicare is expected to run a surplus every year through 2020.

But that’s where the good news ends. After 2020, Medicare is expected to swing to an annual deficit, which will continue for the foreseeable future. Here’s a thoroughgoing discussion of the problem, but in a nutshell, with the retirement of the massive baby boomer generation, there simply won’t be enough taxpayers contributing to the program to take care of all of the beneficiaries. The trust fund’s reserves are expected to be completely depleted in 2028, after which point the incoming payroll taxes will only be enough to cover about 87% of the program’s costs. There are ways this could be fixed, such as by raising Medicare taxes, but for now, that’s where the financial state of Medicare’s hospital insurance program stands.

2. All parts of Medicare are taxpayer-funded 

To see clearly the financial condition of Medicare even further, it’s important to point out that not all parts are taxpayer-funded. Specifically, when you see discussions about Medicare’s funding problem, that only refers to Medicare Part A (hospital insurance). Part A is funded by workers’ payroll taxes and the Medicare Hospital Insurance Trust Fund.

Parts B (medical insurance) and D (prescription drug coverage) are financed through beneficiary premiums and general revenue. Taxes and the health insurance trust funds are not used to support them. If, for example, it is determined that Medicare Part B needs more revenue next year to cover its promised benefits, the premiums that beneficiaries are required to pay can rise.

3. Medicare covers all of your medical expenses in retirement

Most people who are already receiving Medicare benefits know that this isn’t true, but it remains as one of the most common Medicare myths, especially among younger Americans.

While Medicare Part A and Part B do cover a great deal of healthcare costs, there are a lot of expenses Medicare doesn’t cover. Just to name some of the most common:

• Deductibles – Medicare Part A has a $1,340 deductible per benefit period for hospital stays, and Part B has a $183 deductible for 2019.
• Coinsurance payments – Hospital stays of longer than 60 days have a\ coinsurance payment, in addition to the deductible.
• Part B co-pays – After you meet the $183 Part B deductible, Medicare generally covers 80% of medical services. The other 20% is your responsibility.

A Medigap plan can help you cover these, but you’ll need to pay an additional premium for one of these plans. In addition, Medicare won’t pay for long- term care, dental care, eye examinations for glasses, dentures, or hearing aids.

4. Medicare enrollment is always automatic

Automatic Medicare enrollment for people aged 65 is a half-myth. What I mean is some people are automatically enrolled in Medicare, while others must sign up.

Specifically, if you’re already receiving Social Security benefits when you turn 65, have gotten disability benefits for at least 24 months, or have ALS (Lou Gehrig’s disease), you’ll automatically get Medicare Parts A and B on the first day of the month you’ll turn 65.

If none of these three conditions applies to you, you’ll need to sign up. You can do online at the Social Security Administration’s website in about 10 minutes. Be sure to sign up during your initial enrollment period. This is a seven-month time frame beginning three months before the month in which you’ll turn 65.

5. Medicare is free

Another half-myth. Medicare Part A is free, if you’ve earned at least 40 Social Security credits throughout your career or otherwise qualify for benefits. However, Part B, which is the Medicare you’ll use to go see your doctor, has a monthly premium you’ll have to pay. The standard Part B premium is $170.10 in 2022 for new beneficiaries, and this is adjusted annually. In addition, high- income beneficiaries are required to pay higher premiums. The majority (about 70%) of Medicare beneficiaries pay their premiums directly through their Social Security benefits, so while you may not have to write a check each month, it’s important to realize that you will have to pay for your Medicare benefits.