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6 Facts About Medicare You Didn't Know

By Selena Maranjian – Oct 31, 2016 at 3:43AM

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Medicare is -- or will be -- critically important to most of us, so it's smart to be more familiar with it and to know what the people you send to Washington might do to it.

There's a good chance you're well aware that Medicare exists but are only vaguely aware of how it works and what it does. There's much you should know about it, though, because it will probably play a vital part in protecting your health in the future. After all, it serves around 55 million Americans -- a major chunk of the population. The more you know about Medicare, the better you can plan for and envision your financial future -- and some of the things to know are just simply interesting. Here are basic and financial facts about it that you probably don't know.

Image source: Flickr user frankieleon.

No dental or vision

For starters, while your current health insurance, perhaps sponsored by your employer, may include dental and vision coverage, "original" Medicare does not. It doesn't cover most hearing-related expenses, either, such as hearing aids. (Original Medicare is what is known as Part A and Part B, respectively covering hospital and medical services, often complemented by Part D, which covers prescription drugs.) Many Medicare Advantage plans (which you can choose instead of original Medicare, and which millions of enrollees have chosen) do offer dental and/or vision coverage, with some offering a little hearing-expense relief as well.

Image source: Pixabay.

A bloody nuisance

You may be surprised to learn that enrollees in original Medicare may have to pay for blood. Blood you receive from a hospital is often from a blood bank, in which case it's typically free for the patient. If the hospital or provider has paid for the blood you get, though, you'll likely be expected to pay those costs for the first three units you receive in a calendar year. If you get blood from a healthcare provider, you'll typically be charged a copayment for processing and handling, and your Part B deductible will also apply. In addition, if the provider had to pay for the blood, you'll be on the hook for the cost of the first three units. Alternatively, you can have the blood donated by friends or family.

$505 billion

Medicare, as you might imagine, is a rather costly undertaking. You probably don't appreciate just how costly, though. In 2014, net federal outlays for Medicare amounted to a whopping $505 billion. The program wasn't initially expected to cost that much. Commentator Avik Roy has noted, "In 1965, government experts projected that in 1990, on an inflation-adjusted basis, Medicare would cost $12 billion. In reality, Medicare in 1990 cost $107 billion.

Image source: Getty Images.


Taxes are withheld from our paychecks not only for Social Security but also for Medicare. Most workers have 7.65% of their earnings shaved off for Social Security and an additional 1.45% for Medicare. The total tax rates are twice that, though -- 15.3% for Social Security and 2.9% for Medicare. Most workers pay only half, while their employers pay the other half. Self-employed folks, though, have to cough up the full amount. High earners pay a little more into the Medicare trust fund -- an additional 0.9% of earnings, for those individuals earning more than $200,000 and couples earning more than $250,000.

Image source: Getty Images.

Facing insolvency

Just as many worry that Social Security will run out of money, one of the Medicare trust funds is also facing insolvency. According to a recent trustee report, the fund supporting Part A coverage "...will be depleted in 2028, two years earlier than projected in last year's report. At that time dedicated revenues will be sufficient to pay 87% of [Part A] costs." This might sound bad, but it's not a matter of the program going broke or being bankrupt. With no changes, Part A would still be 87% funded in 2028 and Part B is expected to be funny funded. Furthermore, just as with shortfalls facing Social Security, there are a number of ways that the program can be shored up, such as by upping the tax rate. Additionally, the Affordable Care Act (otherwise known as Obamacare) has extended the insolvency deadline by more than a decade.

Image source: Getty Images.

Medicare for all?

An intriguing proposal for Medicare that has been endorsed by many, including Bernie Sanders, is "Medicare for all" -- essentially expanding the program to cover all Americans, not just those 65 and older or those with disabilities. In other words, it would be a federally administered single-payer healthcare system, with the advantages of lower costs resulting from the bigger bargaining power the government would have when dealing with the healthcare industry. Hillary Clinton has proposed a plan that would extend Medicare to Americans 55 and older. Donald Trump's plans for Medicare aren't completely clear, but he has clearly advocating ending Obamacare.

Medicare is -- or will be -- critically important to most of us, so it's smart to get more familiar with it and to know what the people you send to Washington might do to it.

Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, owns no shares of any company mentioned in this article.  We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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