The ABC’s (And D’s) Of Medicare

With more and more Baby Boomers retiring, more and more people including the Boomers, and their children and families are going to have questions and concerns about Medicare. Questions can range from what Medicare is, what it does, what it doesn’t do, and the nuances that make up our nation’s health care for retirees.

Medicare was created in 1965 by the Social Security Act and was signed into law by Lyndon Johnson.

Currently, Medicare is funded via taxation and premiums paid by Medicare subscriber. Part A – which we will cover in a future article, is funded by a 2.9% tax on wages. Unlike Social Security tax that has a limit or cap on the amount of income that can be taxed ($110,100 in 2012 and $113,700 in 2013), Medicare has no such wage base. The 2.9% tax is on an unlimited amount of earnings.

Eligibility for Medicare typically starts for those who turn age 65 and are permanent citizens of the US. Persons are automatically enrolled at age 65 if they have yet to start collecting Social Security. Persons electing to receive Social Security benefits before their full retirement age (FRA), must enroll manually in Medicare at age 65. Persons can also be eligible for Medicare based on having a disability covered under Social Security for 24 months, end-stage renal failure (requiring dialysis), and amyotrophic lateral sclerosis (ALS – Lou Gehrig’s Disease). Finally, Medicare is available for covered railroad workers receiving Railroad benefits.

According to, enrollment is set to hit 78 million people by 2030 – as the majority of baby-boomers will be enrolled.

Medicare is broken down into three parts: A, B and D. Wait a second. Didn’t we skip a letter? Yes. We’ll talk about Part C or Medicare Advantage a little later on. Next time, we’ll talk about Part A.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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