Benefits Ch 7
Medicare Parts A and B
*Coinsurance (20%) after an annual deductible.* *No annual out-of-pocket limit.* Services not covered by Medicare part A or B - Most dental care including dentures. Eye exams related to prescribing glasses. Cosmetic surgery. Acupuncture. Hearing aids and exams for fitting them. Long-term care.
Unemployment Insurance Weekly Benefit Amounts (WBAs)
3 methods - (1) A fraction of the highest wages for a calendar quarter earned during the base period. (2) A percentage of the average weekly wage earned during the base period. (3) A percentage of annual wages.
Social Good
A booming economy, low levels of unemployment, progressive wages and benefits, and safe and healthful working conditions. The government established Social Security and workers' compensation insurance programs for the social good.
Social Security Act of 1935 set up two programs
A federal system for retired workers. A system of unemployment insurance administered by the federal government and state governments.
Original Medicare Plan (A and B)
A government run fee-for-service plan includes - (1) Health-care services. (2) Medical supplies. (3) Certain prescription drugs. Participants choose to receive care from any licensed health-care provider or facility (that accepts Medicare patients).
Survivor benefits eligibility
A worker needs to have accumulated at least 40 credits to qualify family members for survivor benefits.
Eligibility Criteria for Medicare Benefits
Age 65 or older with 40 credits. Automatically extends to spouses. Disabled family members are eligible. Younger individuals with serious disabilities. Eligible - part A. Fewer than 40 credits requires a premium for part A. Part A coverage automatically qualifies individuals for part B - Premiums $135.50 and higher (higher income). Deductible $185 per beneficiary (2019).
Assignment
Assignment: Medicare doctors or providers must agree to accept the Medicare-approved amounts as full payment for covered services. If they agree to assignment they must - (1) Charge you only the Medicare deductible and coinsurance. (2) Submit your claim directly to Medicare. Doctors can be "non-participating" and choose to accept assignment for only certain services. They can charge more than the Medicare-approved amount but it is limited "the limiting charge."
Minimum earnings and employment requirements
Base period: Minimum employment period to qualify for unemployment insurance benefits. Three most common methods - (1) Multiple of high-quarter wages - Workers must earn a certain amount in the quarter with the highest earnings of their base period. Workers must earn total base period wages that are a multiple (1.5) of the high-quarter wages. (2) Multiple of weekly benefit amount - First compute weekly benefit amount (Worker must have earned a multiple (often 40) of this amount during the base period). Most states also require wages in at least two calendar quarters. Some states allow a reduced weekly benefit amount to meet the multiple requirement. (3) Flat qualifying amount - Method requires a certain dollar amount of total wages earned during the base period. Used by most states with an annual-wage requirement for determining the weekly benefits.
Financing unemployment insurance benefits
Benefits are financed by federal, and sometimes state, taxes levied on employers. Federal tax is levied under the Federal Unemployment Tax Act (FUTA) - Employer contributions amount to 6.2% of the first $7000 earned by each employee. $7000 is the minimum taxable wage base but most states set the based according to the average wage level. The federal government deposits 5.4% to the Federal Unemployment Trust Fund - The Treasury Department invests this money. Retaining .8% to cover administrative costs. States impose taxes on employers to fund their unemployment programs, permitted by state unemployment tax acts (SUTA taxes).
Survivor benefit amount determination
Benefits are usually less than a worker's PIA. SSA pays monthly benefits ranging from 71.5-100% of PIA (Primary Insurance Amount). SSA pays a lump-sum to surviving spouse if - (1) The worker earned at least 6 credits of the last 13 quarters just before death and the surviving spouse lived with the worker at the time of death. (2) Surviving children receive benefit if no eligible spouse. In 2016, the average monthly survivor benefit was - $2,680 for a widowed mother and two children. $1,285 for a widow or widower alone.
Medicare Part A Coverage - Hospital Insurance
Covers both inpatient and outpatient hospital care and services. Inpatient hospital care in a semiprivate room, general nursing, and other hospital services. Home health services limited to reasonable and essential part-time skilled nursing care and physical therapy. Hospice care for people with terminal illness. Skilled nursing facility care up to 100 days/year.
Origins of Social Security
Early programs minimized income discontinuity caused by the Great Depression. Great Depression - Scores of businesses failed and masses of employees became chronically unemployed. Protected families from financial devastation during long unemployment spells. Ensuring the financial solvency of employees contributed to the well-being of the economy allowing some companies to remain in business. Amendments established health-care protection to those 65 or older.
Duration of unemployment insurance benefits
Emergency Unemployment Insurance (EUC) - Provided 13 additional weeks of federal benefits to those who exhausted state benefits. (Congress enacted the Unemployment Compensation Act of 2008 expanding the EUC to 20 weeks nationwide and provided 13 more weeks of EUC - Expired at the end of 2013.) Supplemental Appropriations Act of 2008.
Federal Insurance Contributions Act (FICA) and Self-Employment Contributions Act (SECA)
Federal Insurance Contributions Act (FICA): Requires that an employer pay tax based on its payroll; employees contribute tax based on earnings, which is withheld from each paycheck. *7.65% each for employers and employees.* Self-Employment Contributions Act (SECA): Requires that self-employed individuals contribute to the OASDI and Medicare programs, but at a different tax rate (15.3%).
Medicare Part D: Medicare Prescription Drug Benefit
First offered in 2006, referred to as Part D. Run by Medicare-approved drug plans. Separate enrollment although may be included in Medicare Advantage (Part C) plans. Permanent late fee added to your monthly premium if you enroll late. Participants pay a deductible ($360 in 2016). Expenses $360 to $3,310 to $4,850, participants pay - 35% of the cost for brand-name drugs and 44% for generic drugs (2018). The expense range ($3,310 to $4,850) is known as the coverage gap (to be eliminated by 2020 as part of PPACA). Past the coverage gap you automatically get "catastrophic coverage"...reduced coinsurance or copayment for remainder of year.
Old-age benefits eligibility criteria
Fully insured: Individuals earn this when they have earned the minimum number of credits (40). Once fully insured, there are age criterion. Full retirement age - Early retirement at 62, means permanently reduced benefits prior to full retirement age. If born before 1938, full retirement age is 65, but the age is gradually increasing to age 67. There are incentives for delaying retirement - (1) Benefits increase in working from age 67-70. (2) Benefits are reduced from 62-67. (3) Percentage increase depends on birth year, up to a maximum.
Medicare Advantage Plan
Includes options such as - (1) HMOs. (2) PPOs. (3) Medicare special needs plans. (4) Medicare medical savings accounts plans (MSAs). Typically include part A, B, and D. Run by private companies subject to Medicare regulations.
Varies by statue, but general criteria for unemployment insurance benefits...
Limited voluntary employment and involuntary unemployment. Minimum earnings and employment requirements. Waiting period: Usually one week folowing submission of a claim, prior to paying benefits. Capacity to work and availability for work - Unemployed workers must be metnally and physically capable of performing work. Availability for work is a person's willingness and readiness to work. Actively seeking suitable work (Suitable work: Jobs that require skills, knowledge, and ability similar to a person's customary work. Offers employment terms and conditions that do not violate relevant laws).
Medicap
Medicap: Voluntary insurance pays for services not covered under part A and part B. From private insurance companies for an extra fee. Most plans cover coinsurance, copayments, and deductibles. May cover care outside U.S. Federal and state laws limit these plans to up to 10 standardized choices with varying protection. Medicare select plans: Medigap policies that offer lower premiums in exchange for limiting the choice of health-care providers. Three states do not offer Medigap insurance - separate rules apply in Massachusetts, Minnesota, and Wisconsin.
Medicare Part C: Medicare Advantage
Medicare Advantage: An alternative to the original program. Choices in providers. Provides beneficiaries the opportunity to receive health care from a variety of options, including private fee-for-service plans, managed care plans, or medical savings accounts. Established in 1997 with the Balanced Budget Act. Usually include Medicare prescription drug coverage (part D). Plans have yearly limit on out-of-pocket costs. Plans must cover all of the services that original Medicare (A and B) covers; but may also offer more such as vision, hearing, or dental. Cost sharing is lower but you cannot use a Medigap policy. Original Medicare and Medicare Advantage usually don't cover care outside the U.S.
Financing Medicare Programs
Medicare tax or hospital insurance tax - Supports part A programs. Employers and employees contributed 1.45%. Self-employed individuals contributed 2.9%. Not subject to taxable wage base. All payroll amounts and wages are taxed.
Family members include...
Nondisabled widow or widower at the full retirement age or older. Disabled widow or widower as young as age 50. Nondisabled widow or widower at any age if he or she takes care of the worker's children under age 16 or disabled children at any age. Divorced spouse as young as age 60. Unmarried children under 18, or up to age 19 if attending elementary or secondary school on a full-time basis. Disabled children at any age if disability began before age 22 and the parent was unmarried at the time. Stepchildren, grandchildren, or adopted children (in most cases). Dependent parents at age 62 or older.
Employers required to participate in social security programs
OASDI and Medicare - (Medicare you can get when you're 65, Medicaid would end at age 65). Three exempt groups - (1) Federal government and railroad workers exempt from OASDI but not Medicare. (2) State and local employees already covered under other plans. (3) Children under 21, except those 18 and older working in their parents' business. Unemployment Insurance - State unemployment programs provide benefits to millions of individuals. Workers file an initial claim with their state's office. Requirements for eligibility varies by state.
Administration of Social Security Programs
OASDI and Medicare administration - Social Security Administration and Center for Medicare and Medicaid Services. Unemployment insurance administration - Employment and Training Administration: Oversees unemployment insurance programs.
Amendments of Social Security Act of 1935 Include
Old-Age, Survivor, and Disability Insurance (OASDI): The programs that provide retirement income, income to the survivors of deceased workers, and income to disabled workers and their family members. Medicare: Nearly serves all U.S. citizens of at least age 65, and disabled Social Security beneficiaries, by providing insurance coverage for hospitalization, convalescent care, and major doctor bills.
Survivor benefits depends on...
Primary insurance amount (PIA): Equals the monthly benefit amount paid to a retired worker at full retirement age or to a disabled worker. Average indexed monthly earnings (AIME): Represent a person's earnings prior to age 62, disability, or death, adjusted for changes in the person's earnings over the course of his or her employment, and for changes in average wages in the economy over the same period. Automatic cost-of-living adjustments (COLAs) guarded against inflation. Each December, the SSA considers increased based on the consumer price index (CPI). COLA was 2% for 2018, and 2.8% for 2019. Formulas used to determine benefits are complex.
SUTA Taxes
Rates vary according to an experience rating. Each state applies different tax rates to companies. Each company's rate depends on its prior experience with unemployment - A company with many layoffs pays a higher tax rate than a company that does not lay off workers. This system implies a company can manage its unemployment tax burden.
Average Indexed Monthly Earnings (AIME)
Represents earnings before 62, disability, or death. Using AIME to determine the PIA ensures OASDI benefits replace the same proportion of income for every beneficiary. Actual earnings are "indexed" to account for changes in average wages since the year earnings were received. Social Security calculates your AIME during the 35 years in which you earned the most. *A "formula" is applied to the AIME to determine your basic benefits or Primary Insurance Amount (PIA).*
Retirement benefit amount determination
Retirement benefits equal the primary insurance amount (PIA). Family benefits usually equal 50% of the PIA. In 2015, the average annual monthly benefit for retired workers was $1,335.
Qualifying OASDI Benefits
Social security credits: Determine eligibility for OASDI and Medicare benefits. Employees accumulate credits based on their payment of Social Security taxes. Earning one credit for each $1,260 of earnings, up to four credits per year. Employees must earn 40 credits to be eligible to receive retirement benefits. Individuals do not forfeit credits when they change jobs or become unemployed.
OASDI contains two additional benefits established by amendments to the SSA
Survivior's Insurance, 1939. Disability Insurance, 1965.
Medicare
The Medicare program serves citizens age 65 or older by providing insurance for hospitalization, convalescent care, and major doctor bills. A 1965 amendment to the Social Security Act created this program. Medicare as the primary or secondary payer - Individuals with Medicare may also have (1) An employer's group health plan. (2) A retiree health insurance plan. (3) An employed spouse's group health plan. Questions arise regarding which plan pays first - Guidelines provide the answer (pgs. 206-207). Open enrollment for all Medicare plans is October 15 to December 7 with effective date 1/1. Special enrollment date requirements for initial eligibility.
Determining benefit amounts
The SSA pays set monthly benefits to OASDI recipients who are retired and/or disabled.
Disability Benefits
The SSA pays totally disabled workers. Disability is an inability to engage in any substantial gainful activity (SGA) due to a medical or mental impairment. Work is "substantial" if it involves significant physical or mental activities or both. Does not have to be full-time employment. "Gainful" work activity is - Performed for pay or profit, or generally performed for pay or profit, or intended for profit, whether or not one is made. Individuals who meet the definition must then meet two criteria - (1) Recent work test: Considers the age at which an individual becomes disabled. (2) Duration of work test: Considers whether an individual has worked sufficiently long enough (or has contributed to Social Security).
Social Security Numbers
The Social Security Act authorized a system to track employees' wages for determining benefits. Led to the creation of the nine-digit social security number in the late 1930s. The SS Administration issues numbers to U.S. citizens, foreign students, and resident aliens.
Unemployment Insurance
The federal-state unemployment program provides income for workers unemployed through no fault of their own. Each state administers its own program. States pay into a central tax fund administered by the federal government, which then invests these payments and disburses funds to the states as needed.
Financing OASDI Programs
The largest share of FICA tax funds OASDI - In 2018, 6.2% of employer/employee contributions and 12.4% from self-employed individuals. OASDI taxes are subject to taxable wage base. (Taxable wage base: Limits the amount of annual wages or payroll cost per employee subject to taxation.) In 2018, the amount was $128,400 for everyone.
Financial status of the OASDI and Medicare Programs
To ensure viability - (1) Increase the FICA tax rates for these programs. (2) Reduce the level of benefits. The Social Security system is a pay-as-you-go benefit system - No guarantee that benefits will be available in the future with a $46 billion deficit in 2015. OASDI trust fund expected to be depleted by 2034. Medicare funds face a more immediate shortfall than does the OASDI trust funds, already paying out more than it receives and running out by 2030. Three factors hastened the deterioration of the Social Security programs - (1) Individuals living longer, and receiving more benefits. (2) Increase in lower wage workers means less FICA tax amounts. (3) Unemployment was high during the recession.
Medicare Part B Coverage - Medical Insurance
Voluntary supplement to help pay for services not covered under part A. Doctors' services. Outpatient care. Clinical laboratory services. Many preventative health services. Ambulance services. A long list of other services.
Limited voluntary employment and involuntary unemployment
Voluntary termination usually disqualified workers unless they quit for *reasonable cause* (creation of working conditions that cannot be tolerated by any sensible person). Involuntary termination does not guarantee eligibility if disqualifying events occurred - (1) Refusal of suitable work. (2) Misconduct. (3) Participation in some labor disputes. (4) Regular breaks between school terms for education. (5) Deliberate misrepresentation to receive benefits.
Old-age benefits
When the Social Security Act was passed, it was based on a single-earner family model. OASDI was designed to compensate stay-at-home spouses. Today, both spouses typically work with both earning their own SS retirement benefit. Same-sex married couples should be eligible for benefits (based on Supreme Court ruling giving them the right to marry).
Disability benefit amount determination
Worker's disability equals the full PIA and family members usually equal half of PIA. In 2016, the average monthly disability benefit was - $1,166 for all disabled workers. $1,983 for a disabled worker, spouse, and one or more children.
Comparing workers' compensation with social security disability and survivor's benefits
Workers' compensation pays medical care for work-related injuries after a brief waiting period. Also pays permanent partial and permanent total disability after several weeks. Pays rehabilitation and training benefits. Pays benefits to survivors of workers who die of work-related causes. In comparison, Social Security - (1) Pays workers with long-term permanent disabilities from any cause, if unable to work. (2) Pays for rehabilitation services and survivor benefits to families of deceased workers. (3) Benefits begin after a five-month waiting period.
