Medicare Hot Topics 04/08/2013.

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Almost all Americans who work pay into the Medicare system, but not everyone knows about the benefits they will become eligible for when they turn 65. Here's a look at the valuable health insurance you will get in retirement:

Tax rate. Most workers pay 1.45 percent of their earnings into the Medicare trust fund, and companies pay a matching 1.45 percent per employee. Self-employed workers pay 2.9 percent of their earned income into the trust fund. Beginning in 2013, the Affordable Care Act enacted an additional Medicare tax equal to 0.9 percent of earnings over $200,000 for individuals and $250,000 for couples.
When to sign up. You can sign up for Medicare beginning three months before you turn 65, and coverage can start as soon as the first day of your birthday month. The initial enrollment period lasts until three months after your 65th birthday. If you fail to sign up during the seven-month window around your 65th birthday, you can sign up between January 1 and March 31 each year (and get coverage that begins on July 1), but you may be required to pay permanently higher premiums for late enrollment. Monthly Part B premiums increase by 10 percent for each 12-month period you were eligible for Medicare but didn't sign up for it. If you or your spouse is employed and covered by a group health plan at work, you must sign up within eight months of leaving the job or the coverage ending to avoid the higher premiums.

What is not covered? There are a variety of medical services commonly used by older people that Medicare doesn't cover, including routine dental or eye care, dentures and hearing aids. Medicare also does not cover extensive long-term care in a nursing home or assisted living facility.

Funding deficit. The Medicare hospital insurance trust fund is expected to be depleted earlier than the Social Security trust funds. The trust fund has paid out more in hospital benefits and other expenditures than it received in income since 2008, and is projected to be exhausted in 2024, according to the 2012 Social Security and Medicare Boards of Trustees reports. Potential strategies to fix the funding shortfall include increasing the payroll tax from 2.9 percent to 4.25 percent, reducing expenditures by 26 percent or some more gradual combination of the two approaches

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