What is FICA?
FICA is an acronym for "Federal Insurance Contributions Act." FICA tax is the money that is taken out of workers' paychecks to pay for Social Security retirement and Medicare (Hospital Insurance) benefits. It is a mandatory payroll deduction. FICA tax is paid by both workers and their employers.
Social Security and Medicare Withholding Rates
The current tax rate for social security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total.
-If you make 60k per year and work for 40 years paying for Part A, then you will have contributed 15.3% of your earnings to be paid into the system. That is equal to $367,200 in 40 years time.
-Your contribution to Medicare on average would be 2.9%, which is $69,600. And, that would be split with your employer.
Below are the premiums, deductibles, and coinsurance numbers for Original Medicare for 2017 from Medicare's website. Although this list is informative, it is best to meet with an agent to learn how the numbers work together.
Part A (Hospital)
Most people don't pay a monthly premium for Part A
If you buy Part A, you'll pay up to $413 each month.
If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $413.
If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $227.
Days 1-60: $1,316 deductible
Days 61-90: $329 per day of each benefit period
Days 91 and beyond: $658 per day. These are your "lifetime reserve days" you have 60 days total over your lifetime. Once you use these days, they are gone.
Beyond lifetime reserve days: All costs.
Part B (Medical)
The standard Part B premium amount is $134 (If new to Medicare in 2017 or not collecting your social security benefit, or higher depending on your income). However, most people who get Social Security benefits will pay less than this amount ($109 on average).
Deductible and coinsurance
$183 per year. After your deductible is met, you typically pay 20% of the Medicare-approved amount for most doctor services (including most doctor services while you're a hospital inpatient), outpatient therapy, and durable medical equipment.
Penalty for not having Part B
A is an entitlement and B is voluntary but there is a penalty. Your monthly premium for Part B may go up 10% for each full 12-month period that you could have had Part B, but didn't sign up for it.
If you are of "above average" means then Medicare will make you pay a higher rate for your Part B and Part D monthly Premium based on your Modified Adjusted Gross Income (MAGI).
Example: Individuals with a MAGI above $85,000 up to $107,000
Married couples with a MAGI above $170,000 up to $214,000
- Part B: Standard premium + $53.50
- Part D: Your plan premium + $13.30
*** The additional premium amount goes all the way up to:
- Part B: Standard premium + $294.60
- Part D: Your plan premium + $76.20
Part D premium
The monthly premium about varies by plan. The average cost per month is $30 plus drug co-pays or coinsurance.
Penalty for not having Part D
Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($35.63 in 2017) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.
If you have questions or are confused if you are liable for any of these costs, book a meeting with an agent. The goal is to lower your potential cost as low as possible while still receiving great medical care when you need it.
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