February 14th 2024
By Ari Parker
Learn the difference between Medicare and Social Security, and how the two federal agencies work together.
By Ari Parker
It’s common for older Americans and retirees to have questions about Medicare and Social Security. Both federal programs work together to serve the same populations, but they are run by two different organizations.
The Social Security Administration (SSA) handles a number of different financial responsibilities, like providing assistance to Americans who are retired or have a disability.
Medicare is a federal health insurance program that draws payment from Social Security. If you draw from Social Security when you retire or if you have a qualifying disability, the SSA automatically enrolls you in Medicare and deducts monthly premiums from your Social Security income.
Medicare and Social Security are two different government programs that work together.
Medicare provides health insurance for people who are 65 and older and for people with qualifying disabilities.
Social Security provides financial assistance to people who are retired, have a disability, and/or need survivor benefits.
The Social Security Administration automatically enrolls you in Medicare when you turn 65 if you’re already drawing from Social Security.
Your Original Medicare premiums will be deducted from your Social Security income. You can also choose to deduct your premiums for Part D and Medicare Advantage plans from your Social Security income.
The government created Medicare in 1965 to provide health insurance for people who are 65 and older and people with certain disabilities. While you can opt out of Medicare, 94% of Americans benefit from the program, which is about 64 million people!
Medicare has four parts, which we outline below. You can read our summary of Medicare here.
Medicare Part A pays for services you have in a hospital, skilled nursing facility, or hospice care, as well as some home health care. Medicare Part B is your outpatient insurance and covers medically necessary services and preventative care. Part A is free for most Americans, but Part B has a monthly premium. We’ll discuss how this is relevant for Social Security below.
Introduced in 2003, Medicare Advantage is a private, bundled insurance option that generally includes broader coverage of health services, including dental, vision, and hearing care. Unlike Original Medicare, Medicare Advantage plans don’t have standard pricing for out-of-pocket expenses.
Medicare Part D provides prescription drug coverage. You can get Part D coverage through a stand-alone plan or as part of a Medicare Advantage plan.
Social Security provides financial income to people who are eligible, including retirees, people with disabilities, and people who have lost their spouse.
As long as you’ve paid Social Security taxes for at least 10 years, the Social Security Administration will provide you with an income when you retire. The Social Security income you receive is funded by payroll taxes. These payroll taxes are known as FICA (Federal Insurance Contributions Act) taxes and are deducted from your paychecks.
If you have a disability or have low income and resources, you may also be eligible to receive benefits from Social Security. Depending on your situation, you can receive Social Security Income (SSI) or Social Security Disability Insurance (SSDI) benefits.
The key difference between Medicare and Social Security is that Social Security provides financial support in the form of retirement, disability, and survivor income benefits, while Medicare offers health insurance coverage primarily for people aged 65 and older. Medicare’s focus is on health care, and Social Security’s focus is on general financial protection for people who qualify.
They differ in a few other, related ways:
Management: Social Security handles enrollment for Original Medicare, processes applications, and collects premiums. Medicare administers the healthcare plans and negotiates prices with healthcare providers.
Funding: Medicare is funded through a combination of payroll taxes, premiums, and general revenue. Social Security is funded primarily through payroll taxes (FICA taxes) collected from working Americans.
Administration: The Centers for Medicare & Medicaid Services (CMS) is responsible for managing Medicare. The Social Security Administration (SSA) is responsible for managing Social Security benefits.
There are several key similarities between Medicare and Social Security. First, they are both federal programs that provide support to older citizens, retirees, or people with disabilities.
A few other commonalities include:
Funding: Both programs are funded through payroll taxes.
Support for people with disabilities: Medicare and Social Security provide benefits to people who are unable to work due to a qualifying disability. If you qualify for Social Security Disability Insurance, you are automatically enrolled in Medicare after 24 months of receiving benefits.
Important for retirement planning: Both Medicare and Social Security play a role in retirement planning. Social Security provides a regular income stream during retirement and Medicare helps cover healthcare expenses for seniors.
Social Security and Medicare come together to make health insurance more affordable for you. You can think about it this way: Medicare handles plans and coverage while Social Security handles premiums and processing.
This is how Social Security works with Medicare:
The Social Security Administration (SSA) automatically enrolls you in Part A and Part B if you’re 65, you don’t have insurance through an employer, and you are drawing from Social Security.
The SSA deducts Medicare Part A and Part B premiums from Social Security.
If you have a Part D prescription drug plan, you can choose to have your premiums deducted from your Social Security income. The same goes for Medicare Advantage plans.
If you need help paying for a Part D plan, the SSA provides support through the Extra Help program.
The SSA also provides member support by answering questions about signing up for Medicare, premiums, and Social Security collection.
Social Security and Medicare are so intertwined that you may not always know which organization to contact for help. Here’s a quick breakdown of when you would need to contact Medicare and when you would need to contact Social Security:
You need to report a change of address or phone number
You have questions about whether or not you’ll be automatically enrolled in Medicare
You need to check the status of your Medicare claims
You have questions about your coverage
You can always reach out to a licensed Chapter Advisor for any and all questions you have about Medicare—from how to enroll and what options you have to how you’ll pay for your coverage. Talk to an Advisor for free, personalized advice by calling 855-900-2427, or scheduling a time to chat today.
