11. Social Security, Medicare and Medicaid Flashcards

1
Q

Major perils covered by Social Security

A

disability, retirement62+, and survivor protection: premature death, disability, outliving one’s income and medical expenses of the aged

Beneficiaries of benefits:
Disabled,
A spouse, former spouse, or a dependent of someone who is receiving Social Security,
A widow or widower caring for a child (under age 16),
A child under 18 (19 if still in high school),
A widow or widower age 60 or older, or
Dependent parent of someone who has died.

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2
Q

Social Security tax dollars

A

Employee and employer pay
+ 7.65 (6.2+1.45)% of earnings up to $160,200 to SSA (FICA-Federal Insurance Contributions Act)
+ 1.45% of earnings > $160,200 to Medicare
+ .9% Medicare surcharge over $200k single/ $250k MFJ

For each dollar, $.85=> trust fund for monthly benefits to retirees and their families and to about eight million widows, widowers, and children of workers who have died
$.15=>trust fund that pays benefits to people with disabilities and their families
<$.01administrative

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3
Q

Earned credits

A

-one credit for $1,640 in earnings 4x/yr
-40 credits required/10yrs to be fully insured/qualify for retirement benefits

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4
Q

Taxes paid (self employed)

A

-15.3% of net earnings up to $160,200 and 2.9% on everything over, + .9% Medicare surcharge over $200k single/ $250k MFJ

Special deductions can be taken to offset extra Social Security tax paid, allowed 7.65% off gross income

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5
Q

A Social Security number is a mandatory requirement for which of the following?

A

Getting a job
Filing tax returns
Receiving Social Security benefits

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6
Q

Michael is self-employed and earns $40,000 in a normal year. How much would Michael normally pay in Social Security taxes?

A

Although Michael must pay the full FICA of 15.3%, he will receive a deduction for the employer portion. This is calculated by multiplying his income $40,000 by .9235 which results in $36,940 which is then multiplied by 15.3% to arrive at the FICA amount of $5,652 (rounded up to the nearest dollar).

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7
Q

Disability benefits

A

-Widows and widowers with disabilities may be eligible for benefits on the record of a spouse.
-People with disabilities who have low income and few assets might be eligible for SSI benefits.
-Children over age 18 with disabilities might be eligible for Social Security benefits on the record of a parent.
-Children of any age with disabilities might be eligible for SSI benefits on their own.

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8
Q

SS definition of disability

A

inability to work in any occupation: A condition under which the individual is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months or result in death.

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9
Q

Requirements for disability claim

A

-medical records from doctors, therapists, hospitals, clinics and caseworkers,
-laboratory and test results,
- names, addresses, phone and fax numbers of the individual’s doctors, clinics and hospitals,
- names of all medications the individual is taking, and
- names of the individual’s employers and job duties for the last 15 years.

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10
Q

When Do Disability Benefits Start?

A

5 month waiting period, payable in 6th full month of disability. No waiting period for disabled children’s benefits

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11
Q

Other disability payments

A

If receiving other disability benefits, the SS disability may be reduced if benefits >80% prior average earnings; also SS benefits may reduce other disability payments from employer group plans

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12
Q

Length of disability payments / incentives

A

depends on periodic medical review. may also receive as incentive to go back to work

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13
Q

Benefit eligibility

A
  • worker’s spouse if +2+ (unless collecting higher SS benefit)
  • worker’s spouse at any age if caring for individual’s child <16/disabled and receiving SS benefits
    -worker’s children if unmarried and <18/<19 but in school as FT student
    -18+ and severely disabled (disability before 22)
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14
Q

Benefit amount for family members

A

Up to 50% , can be more depending on situation, but limit of 150-180% of person’s retirement benefit. If sum of benefits payable on a worker’s account >family limit, benefits to family members will be reduced proportionately

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15
Q

Benefits for divorced spouses

A

Ex-spouse must:
-Have been married to the worker for at least 10 years,
-Be at least 62 years old,
-Be unmarried, and
-Not be eligible for an equal or higher benefit on his or her own Social Security record, or on someone else’s Social Security record.
(if the ex-spouse receives benefits on a worker’s account, it does not affect the amount of any benefits payable to the worker or his or her other family members.)

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16
Q

Survivor Benefits

A

one-time payment of $255 paid to widow/minor children if enough credits, as well as continued monthly payments to:
- widow or widower who is 60 or older,
- widow or widower who is 50 or older and disabled,
- widow or widower- at any age if caring for individual’s child <16/disabled and receiving SS benefits
-worker’s children if unmarried and <18/<19 but in school as FT student
-18+ and severely disabled (disability before 22)
-Parents, if they were dependent on the worker for at least half of their support.

Protection equivalent to $354,000 insurance policy
Disability ins policy worth >$233,000

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17
Q

Benefits to Divorced Widow(er)s

A

-at least age 60 years old or 50 if disabled and have been married to the worker for at least 10 years,
-any age if caring for a child who is eligible for benefits on the worker’s record,
-Not be eligible for an equal or higher benefit on his or her own record, and
-Not be currently married, unless the remarriage occurred after age 60 or 50 for disabled widows.
-In cases of remarriage after the age of 60, the ex-spouse will be eligible for a widow’s benefit on the worker’s record or a dependent’s benefit on the record of his or her new spouse, whichever is higher.

-even if the ex-spouse receives benefits on a worker’s account, it does not affect the amount of any benefits payable to other survivors on the worker’s record.

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18
Q

Aggregate Survivors’ Benefits

A

75% to 100% each up to 150-180% worker’s benefit rate

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19
Q

Retirement Benefits

A

-can retire before reaching full retirement age 65 /67and receive reduced benefits from 62.
-if choose to work beyond full retirement age, can continue working and get full retirement benefits, if delay getting retirement benefits until 70, credits will be earned to increase worker’s benefit amount and a percentage will be added (8% for 2023) up to age 70

20
Q

Birth year for determining full retirement age

A

<1938: 65=>1960+ 67years

21
Q

Reduced benefits

A

For each month of early retirement, PIA (primary insurance amount) reduced by 5/9 of 1%, up to 36 months (20%), further reduction of 5/12 of 1% per month up to an additional 24 months (5% for 4th year)

22
Q

Benefit calculation when working

A

-If<FRA, $1 benefit withheld for every $2 over annual limit of $21,240
-In year FRA, benefits will reduce by $1 for every $3 >limit of $56,620 until month when FRA is reached

Earnings from job / net profit of self-employed is reported, including bonuses, commissions and vacation pay

23
Q

Tax on SS benefits

A

-If combined income between $25-34k, may have to pay taxes on up to 50% of SS benefits; if >$34,000, then up to 85% of SS benefits are subject to income tax

-Joint return: $32-44k, taxes on up to 50%; >$44k, then 85%

Combined income=AGI+50% SS benefits+tax exempt interest, foreign earned income, US possessions, income from Puerto Rico by Puerto Rico residents and amounts from employer’s adoption assistance

Form W-4V to have federal taxes withheld/changed/stopped

24
Q

Medicare benefits

A

basic health insurance program for people 65 or older and many people with disabilities

Those getting SS benefits when 65 will automatically be enrolled in Medicare Part A and have the option to turn down part B.
-initial deductible of $1,600 which covers the first 60 days in the hospital
- daily coinsurance amount of $400 must be paid by the patient for days 61 - 90
-no coverage beyond 90 days.
-lifetime reserve days require a coinsurance payment of $778 per day.
-benefit period ends after the patient has been out of the hospital for 60 days
-eligible for a new 90-day period beginning with the $1,600 deductible. A new benefit period requires a new deductible.

Those disabled will be auto enrolled in Medicare Part A after receiving disability benefits for 24 months and have the option to turn down part B.

Those who turn 65 and plan to keep working but do not plan to sign up for Social Security retirement benefits at that time must call or visit a Social Security office, which can help them decide whether they should sign up for Medicare only as there are penalties for not signing up for Part B when eligible

Part B: standard premium of $170.10+. If a person opts out they can enroll later during the enrollment period which is the first three months of the year. However, if enrollment is delayed the premium will increase by 10% for each 12-month period that the person was eligible for but did not enroll. The exceptions are for those that had continuous group coverage from age 65 until their actual retirement date. They then have 8 months after their group coverage ends to enroll and not be subject to premium increases.

25
Q

Medicare parts

A

Medicare Part A (hospital insurance) coverage is for inpatient hospital care, skilled nursing care, home health care services and hospice care. Permanent kidney failure and require dialysis. care in a skilled nursing facility if medically necessary, following at least three days of hospitalization. hospital charges for general duty nursing, hospital equipment, drugs and biologics, use of the operating room, diagnostic or therapeutic services, and blood transfusions. Care is paid for in full for 20 days, and coinsurance of $200.00 per day applies for days 21 - 100.

Medicare Part B (medical insurance) helps pay for doctors’ services, outpatient hospital care and other medical services.
Part C is a Medicare Advantage Plan offered by private companies, but approved by Medicare. These plans cover all Medicare services, but may also offer additional coverage.
Part D provide prescription drug coverage.

26
Q

Low-income Medicare Beneficiaries

A

Call Medicaid agency to find out if state covers out-of-pocket Medicare expenses, such as deductibles and coinsurance and Medicare premiums

27
Q

Medicaid Funding

A

Federal government overseas Medicaid program through Centers for Medicare and Medicaid Services (CMS), administered at state level. Provides nursing facility services, custodial care and home health care services and has no time limits on services =>nursing home insurance of last resort for the poor and middle class.

Funded federally through Federal Medical Assistance Percentage (FMAP). The states pay the rest and on average approximately 25% of a states annual budget goes to paying for Medicaid expenditures.

28
Q

Mandatory and optional Medicaid benefits

A

Optional benefits at states’ discretion:
Mandatory Benefits include:
Inpatient and outpatient hospital services
Physician services
Nursing facility services>Must be certified and medically necessary
Home health services
Early and periodic screening, diagnostic, and treatment services
Laboratory and x-ray services

Optional Benefits often include:
Prescription drugs
Dental services
Hospice
Preventive and rehabilitation services
Physical therapy
Chiropractic services
Personal care

29
Q

Medicaid eligibility

A
  • U.S. citizen or a resident alien permanently residing in this country.
    -65 years of age, disabled, or blind.
    -meet the financial eligibility criteria which consist of both income and asset tests that vary by state.

Affordable Care Act authorized the expansion of Medicaid to nearly all Americans under age 65 who otherwise meet the income and asset limitations, but it has gone into effect only in the states that have accepted the expansion.

With SSI, there is an asset limit for an individual of $2,000 and $3,000 for a married couple where both spouses are receiving care. However, SSI and Medicaid do not count certain assets that are exempt. These exempt assets include:

Home
Car
Personal Property
Term life insurance and whole life insurance with little or no cash value
Retirement accounts that cannot be withdrawn in a lump sum (a spouse’s IRA or qualified plan will not be counted)
Real or personal property used in a business or for the production of income

Income standard: 138% of the federal poverty level.

Special income group

30
Q

Asset transfers that cause Medicaid penalties

A

Transfers for <FMV
Penalty period =value of property transferred/ave monthly cost of nursing home in that state, look back period of 60 months

Allowed transfers:
Transfer to a spouse
Transfer to a child who is blind or disabled
Transfer in trust for the benefit of a person under age 65 and disabled
Transfer of a home to a child under the age of 21 or a child who has lived in the home for at least two years before the applicant moved to a nursing home and provided care that enabled the applicant to stay in the home during that time
Transfer of a home to a sibling who has an equity interest in it and who lived in it at least a year before the applicant moved to a nursing home

31
Q

Elsa was born in 1961 and is fully insured under Social Security. She plans on retiring and claiming her Social Security retirement benefit at age 70. What percentage of her primary insurance amount (PIA) will Elsa receive?

A

124%
Elsa’s FRA is 67. Claiming Social Security retirement benefits at age 70 will result in an increase of her benefit of 24%

32
Q

What percentage of compensation does an employee pay up to the wage base limit to fund Social Security Benefits (i.e., retirement, disability, survivors)?

A

6.2% of an employee’s compensation up to the wage base limit funds Social Security retirement, disability, and survivor benefits.

33
Q

This year, Tim earned $10,000 in January but did not have earned income subject to Social Security taxes the balance of the year. How many Social Security credits does Tim earn this year?

A

Tim earns the maximum of 4 credits this year. One credit is earned in 2023 for each $1,640 of compensation subject to Social Security taxes up to a maximum of 4 for the year.

34
Q

The waiting period that must be satisfied for Social Security disability benefits is __________.

A

5 full months, payable in 6th month

35
Q

Elsa was born in 1961 and is fully insured under Social Security. She plans on retiring and claiming her Social Security retirement benefit at age 62. What percentage of her primary insurance amount (PIA) will Elsa receive?

A

(5/9ths of 1% x 36 months = 20%) + (5/12ths of 1% x 24 months = 10%) = 30%

36
Q

Juan, age 40, died recently in a car accident, leaving his spouse and three minor children. He was fully insured under Social Security. What amount will his family receive as a one-time lump-sum death benefit?

A

one-time lump-sum death benefit of $255

37
Q

T/F: In retirement needs analysis, Social Security retirement benefits are adjusted for inflation to the retirement year and subtracted from the current income replacement need.

A

F: Social Security retirement benefits will automatically be adjusted for inflation so the currently projected benefit is subtracted from the current income replacement need.

38
Q

To whom does the Social Security Administration currently mail annual statements?

A

Individuals age 60 or older who do not have a “my Social Security” account onlineYou should have checked this.

39
Q

What percentage of compensation does an employee pay up to the wage base limit to fund Social Security Benefits (i.e., retirement, disability, survivors)?

A

6.2% of an employee’s compensation up to the wage base limit funds Social Security retirement, disability, and survivor benefits. 1.45% on unlimited compensation funds Medicare.

40
Q

Which of the following statements is CORRECT regarding the calculation of the Adjusted Indexed Monthly Earnings (AIME) for Social Security retirement benefits?

A

Based on 35 best years of Social Security Earnings
Adjusts (indexes) each year’s earnings to present-day dollars
Calculates average monthly earnings in current dollars

41
Q

Claiming Social Security retirement benefits prior to full retirement age (FRA) reduces a worker’s PIA, true or false?

A

Claiming Social Security retirement benefits prior to full retirement age (FRA) does not reduce a worker’s PIA, but does reduce the percentage of one’s PIA that will be received based on the number of months prior to FRA the worker is claiming retirement benefits.

42
Q

Stuart was born January 3, 1960. If Stuart claims Social Security retirement benefits at age 65, what percentage of his primary insurance amount (PIA) will he receive each month?

A

Stuart’s full retirement age (FRA) is 67. If he claims retirement benefits age 65, he is claiming benefits 24 months prior to FRA and his monthly benefit will be reduced by 13%. 5/9% x 24 months = 13%. He will receive 87% of his PIA.

1 - 0.13 = 0.87

43
Q

In 2023, what is the maximum annual earnings considered in the Social Security AIME calculation?

A

The maximum annual earnings considered for 2023 in the AIME calculation is the Social Security wage base limit of $160,200 (2023).

44
Q

Billy has been married three times. He is age 67 and recently began receiving Social Security retirement benefits. Whom of the following may currently claim Social Security retirement benefits based on Billy’s work record?

Former spouse Tara, age 50, who is caring for a child, age 14, who was born during Billy and Tara’s marriage of 16 years.
Former spouse Shelly, age 62, married to Billy 10 years and currently engaged.
Current spouse, Kate, age 65, married to Billy 2 years.

A

Current Spouse: 62+ (any age if caring for child under 16), married at least one year, worker currently receiving benefits
Former spouse: 62+, married at least 10 years, unmarried, does not need to be receiving benefits

45
Q

Lucia’s Primary Insurance Amount (PIA) is $2,000 per month. She is retiring early and will receive 80% of her PIA. Lucia’s spouse, Nathan, age 62, is also retiring but never paid into Social Security.

How will Nathan’s spousal benefit be factored?

A

Less than 50% of Lucia’s PIA. Spousal retirement benefits are based on the worker’s PIA. The maximum spousal benefit is 50% of the worker’s PIA, but because Nathan is claiming benefits prior to his FRA he will receive less than 50% of Lucia’s PIA.

46
Q

Mario is retiring after a 30-year career. His earnings per year in each decade were as follows:

1st decade: $30,000 per year
2nd decade: $40,000 per year
3rd decade: $50,000 per year
Without factoring any adjustments for inflation, what is Mario’s average monthly income for the Adjusted Indexed Monthly Earnings (AIME) considered for the primary insurance amount (PIA) calculation?

A

Without considering inflation adjustment, Mario’s total lifetime earnings is $1,200,000. However, the AIME calculation uses 35 years (420 months) earnings, so Mario has 5 years of $0 earnings in the 35-year calculation. Without inflation-indexing, Mario’s average monthly earnings are $1,200,000 ÷ 420 = $2,857.

47
Q

The level of provisional income at which 85% of Social Security benefit are subject to regular income tax for married filing separately is ______.

A

0