Employment Quarters and Medicare Part A
In order to understand employment quarters, it is helpful to understand the structure of Medicare Part A. Medicare Part A is a plan used to pay the expense of hospital stays and services. Most often, individuals do not need to pay a premium for Part A if the following is true:
- The individual is 65 or older.
- The individual is eligible to receive benefits from the Social Security Administration or the Railroad Retirement Board.
How Medicare Part A Is Funded
Medicare Part A is paid for by a combination of funds including:
- Employee payroll taxes
- Employer payroll taxes
- Self-employment taxes
- Medicare Part A premiums (for those who do not qualify for premium exemption)
Employment quarters are used to determine eligibility for Social Security or Railroad Retirement Board benefits. By qualifying for these benefits, you automatically qualify for premium-free Medicare Part A benefits.
An "employment quarter" refers to one-fourth of the year in which an individual has been employed and has paid Social Security or Railroad taxes. Social Security or Railroad credits are based on total income during a quarter of a year. The amount needed to earn credit often increases annually in conjunction with increases in average earnings.
Employment quarters are referred to by several other names:
- Quarter of coverage
- Social Security Credits
Number of Employment Quarters Needed for Retirement/Premium-Free Part A
The necessary number of quarters is determined by date of birth.
- Those born in 1929 or later need 40 credits (or 10 years of employment).
- Those born in 1928 need 39 credits.
- Those born in 1927 need 38 credits, and so on.
Qualifying Through Spouse's Employment
For those who do not have enough employment quarters to be eligible for premium-free Medicare Part A, but do have a spouse who has enough quarters for eligibility, premium-free Medicare Part A may be available upon turning 65.
Special rules apply to the following types of jobs:
- Farm work
- Domestic work
- Work for a church or other organization that does not contribute payroll taxes
To determine whether this work counts toward employment quarters for Social Security and Medicare benefits, contact the Social Security Administration.
Some types of employment are evaluated for Social Security and Medicare eligibility using different criteria. The following cases may not qualify for Social Security and Medicare using the above formula:
- Employees of the federal government hired before 1984
- Employees of the railroad who have worked more than 10 years
- Employees of some state and local governments
Railroad employees may be eligible for a retirement annuity under the following conditions:
- Individual is age 60 or older.
- Individual has worked for the railroad at least 360 months.
If an individual qualifies for a retirement annuity, he or she likely qualifies for premium-free Medicare Part A.