Government Benefit Programs (Social Security, Medicare, Medicaid)
What the exam tests
Government Benefit Programs tests Social Security eligibility and benefit timing, Medicare parts and enrollment, Medicaid long-term-care rules, and taxation of benefits.
Core rules
- Social Security full retirement age depends on birth year. Early retirement permanently reduces benefits; delayed retirement credits increase them by 8% per year up to age 70. A spouse may receive up to 50% of the worker’s primary insurance amount.
- Social Security benefits become taxable using provisional income thresholds: $25,000/$32,000 single and $32,000/$44,000 joint.
- Medicare Part A covers hospital care; Part B covers outpatient and physician services; Part C is Medicare Advantage; Part D covers prescription drugs. Enrollment periods and IRMAA surcharges apply.
- Medigap supplements Original Medicare but generally cannot be used with Medicare Advantage.
- Medicaid is needs-based and is the primary payer for long-term custodial care for many people. A five-year look-back applies to asset transfers. Dual eligibles qualify for both Medicare and Medicaid.
Worked example
A worker’s full retirement age benefit is $2,000 monthly. Claiming at 62 means 60 months early: 36 months at 5/9 of 1% plus 24 months at 5/12 of 1% equals a 30% reduction, so the benefit is $1,400. Waiting to 70 adds 36 months at 2/3 of 1%, or 24%, producing $2,480. The trade-off is years of forgone benefits versus a higher lifetime inflation-adjusted payment.
Traps that cost marks
Medicare does not pay for custodial long-term care. Medicaid is not available without meeting income and asset tests. Part B has a premium. Do not assume a spousal benefit is always 50%; it is reduced for early claiming.