Social Security and Medicare are two different government benefit programs, but both offer aid to older and retired Americans. Social Security provides financial support to retirees, while Medicare is a health insurance program that helps Americans age 65 and older pay for doctor visits, hospital stays and other medical care. In both cases, American workers pay into these programs through income taxes, but each program is administered by a different agency: the Social Security Administration handles Social Security benefits and the Centers for Medicare and Medicaid Services is in charge of Medicare.
However, although Social Security and Medicare are two separate programs with separate aims and benefits, the programs jointly help beneficiaries navigate all of their benefits. Here's what you need to know about how Social Security and Medicare work together.
Understanding Your Eligibility
Each of these programs has different eligibility requirements, although the Social Security Administration determines who is eligible for Social Security benefits as well as which individuals can qualify for Medicare benefits.
To become eligible for Social Security benefits, you must have earned at least 40 "credits" while you were employed. As of 2022, you will earn one credit for every $1,510 you receive as income from work, and you can earn up to four credits each calendar year. That means you need at least 10 years' worth of credits to be eligible for Social Security benefits in retirement. You may apply for your Social Security benefits at any time between age 62 and age 70, although the amount of your benefit will increase by approximately 8% for each year you delay between those ages.
Medicare eligibility is reserved for Americans who have reached age 65 or older, although some younger individuals with disabilities, including those with permanent kidney failure requiring dialysis or a transplant, are also eligible for the program. There are multiple parts to Medicare coverage: Part A, which covers hospital and nursing home stays; Part B, which covers doctor's visits, outpatient care, and some medical supplies; and Part D, which covers prescription drugs.
Navigating the Enrollment Process
Social Security and Medicare each have their own processes for enrollment. With Social Security, you will need to apply for your benefits. While you can apply for and receive your Social Security benefits as soon as you reach the age of 62, the amount of your benefit will be permanently reduced from your full benefit if you enroll before your full retirement age between ages 66 and 67, depending on your birth year. If you delay enrollment until after your full retirement age, you will see an approximately 8% increase in your full benefit per year until you reach age 70.
If you already receive Social Security benefits as of your 65th birthday, you will be automatically enrolled in Medicare parts A and B. If you have delayed your Social Security benefits, however, you will have to contact Medicare directly to enroll when you turn 65. Delaying enrollment in Medicare Part B is not ideal, since you may face a late enrollment penalty of up to 10% for every 12 months you're late to enroll.
Deducting Medicare Premiums From Your Social Security Benefits
Paying for Medicare is one of the most significant ways that Social Security and Medicare intertwine. Although Medicare is a government aid program, individual beneficiaries are still required to pay a monthly premium for their coverage. The premium's cost depends on your annual income as listed on your tax return from two years prior. The standard premium cost as of 2022 is $170.10 per month for individuals earning $91,000 or less and couples earning $182,000 or less as of 2020. If your income is greater than that, you can expect to pay a higher premium — up to $578.30 per month for the highest-earning beneficiaries.
If you are receiving Social Security benefits when you enroll in Medicare, your monthly premium will be deducted from your benefit check. This automatic deduction of your Medicare premium from your Social Security benefits offers a streamlined way to ensure that your Medicare payments are always up to date.
The Bottom Line
Social Security and Medicare may be two different programs, but their beneficiaries and aims overlap a great deal. Understanding how these programs work together can help you navigate them both as you approach retirement.