TURNING 65 – Medicare I: The basics and enrollment

Second in a series of articles about necessary steps to take involving federal entitlement programs as age 65 nears

Medicare may seem like a jigsaw puzzle of plans and an alphabet soup of terms to those trying to navigate its complexities. Parts A, B, C and D; supplemental coverage, gaps in coverage; original and traditional Medicare, and more. How do you make sense of all the information and fit the pieces together to get the most suitable plan for your needs?

While it should ultimately prove to be less confusing than it sounds at first, investing a little time to understand your options and requirements in advance of that milestone 65th birthday is a good idea.

Here are the main issues you need to be thinking about, along with links to resources containing more in-depth information:

A quick mini-primer: Part A is hospital insurance, Part B is outpatient insurance, Part C – better known as Medicare Advantage – is managed care offered by Medicare-approved private insurers, Part D is prescription drug coverage. Medicare eligibility begins at 65. There is a lot of information to absorb as you prepare to sign up. You need to be aware of specific steps to take to avoid running afoul of Medicare rules and facing fines later. See below for our full glossary of plan names. 

When you retire at 65 (or later), you need to sign up for full Medicare coverage. This will presumably include Part A for hospital coverage as well as Part B to pay for medical costs such as doctors, X-rays and tests. There are very few instances in which you would not want both A and B. Contact Social Security, which handles Medicare enrollment, at 800-772-1213 with questions about enrollment, plans or coverage or to arrange for an interview by phone or in person.

If you take Social Security or other government retirement benefits early (before age 65), you should be automatically enrolled in Medicare starting at 65. No further action will be needed to get Parts A and B if you already receive checks from either the Social Security Administration or the Railroad Retirement Board. Your Medicare card will be mailed to you three months before your 65th birthday and your benefits will start on the first day of the month in which you turn 65, or the first day of the previous month if your birthday is on the first of the month.

You do still need to apply during the initial enrollment period for a Part D drug plan if you need it, or for a Medicare Advantage plan if you want a (usually) less expensive alternative to original Medicare (Parts A and B).

If you plan to keep working after 65 and stay on your employer’s insurance plan, you can still sign up and receive Part A, which is premium-free if you or your spouse paid Medicare taxes for at least 10 years. You just need to indicate to Medicare that you will not yet be claiming Part B since you have coverage through an employer. Failing to sign up for Part B at 65 can result in a permanently higher monthly premium for your medical coverage once you eventually do sign up. But you will be exempt from this penalty if you have insurance based on your or your spouse’s current work and heed the special enrollment period requirements. Otherwise, the monthly Part B premium rises 10 percent for each full 12-month period that a senior could have had coverage but did not sign up.

Enrolling in Part A at 65 is generally recommended even if you still have work insurance, unless you have a Health Savings Account (HSA) and want to keep contributing to it. The IRS bars HSA contributions once you apply for Medicare or Social Security benefits or if you already receive Social Security. You can keep contributing to your HSA past 65 by simply postponing applying for either Medicare or Social Security, which you are entitled to do without penalty when you have insurance through your job. See this AARP explanation for more information.

If you pay for your own insurance and it is not an employer-sponsored plan for a firm with more than 20 employees, Part B penalties will be imposed once you retire. COBRA does not count as “credible coverage” under Medicare rules. Once your employment or employee coverage ends you have eight months to sign up for Medicare or face penalties.

If you have both Medicare and group health plan coverage through a firm with at least 20 employees (either your current employer or your spouse’s), the group health plan pays first and Medicare pays second. When the group health plan does not pay your entire hospital or medical bill, the doctor or health care provider should bill Medicare for secondary payment.

Additional details on how Medicare works with other insurance can be found in “Your Guide to Who Pays First,” published by the Centers for Medicare and Medicaid Services.

If you work for a firm of fewer than 20 employees, you should enroll in Medicare as soon as you are eligible (age 65) because it becomes your primary coverage provider (Parts A and B both). Your employer plan will become the secondary provider and will not pay for any expenses covered by Medicare.

No Medicare Accepted? Some doctors do not accept Medicare patients due to reduced or delayed reimbursement from the government or third-party insurers. That is not a reason to put off enrolling.  Most eligible physicians and practitioners do participate in Medicare; they can be found through Medicare’s Physician Compare website.

It is important to remember that Medicare does not cover everything. So mind the gap, as the English caution their train passengers: Do not let an essential medical or health need fall through the cracks. Sign up for additional coverage as needed. Even with a comprehensive combination of Medicare’s various parts, replicating the health insurance you had through your employer almost always will require supplementing your coverage with a Medigap plan.

Key summary points:
  • The initial enrollment period for Medicare begins three months before you turn 65 and lasts a total of seven months.
  • In almost all instances, you will ultimately want to have both components of so-called original Medicare – Part A (hospital) and Part B (medical) – along with likely Part D (prescription drugs) and/or Medigap.
  • If you take government retirement benefits before 65, you will be automatically enrolled in Parts A and B starting at 65.
  • If you will keep working after 65 and wish to keep contributing to a Health Savings Account, you can delay enrollment in Part B until your employment ends.
  • Your monthly Part B premium will ultimately be higher by 10 percent for each year past 65 that you delay enrollment, but not if you have work-based insurance coverage when you enroll and if you sign up during specified enrollment periods.
  • Replicating the level of insurance that you had through an employer almost always will require supplementing your Medicare coverage with a Medigap plan.

 Next: Factors to consider in making a plan(s) selection, including supplemental coverage, premium costs, the Part D coverage gap and the combination that should provide comparable coverage to what you had through an employer.


GLOSSARY OF PLAN NAMES

MEDICARE PART A – Hospital insurance. Covers inpatient stays, care in a skilled nursing facility, hospice care and some home health care.
MEDICARE PART B – Medical insurance. Covers certain doctors’ services, outpatient care, medical supplies and preventive services.
MEDICARE PART C – Managed care plans provided by private companies that contract with Medicare, replacing and providing broader coverage than Parts A and B. Better known as Medicare Advantage.
MEDICARE PART D – Prescription drug coverage, offered by insurance companies and other private companies approved by Medicare.
MEDICARE ADVANTAGE – Name used most often for Medicare Part C
MEDIGAP – Health insurance coverage sold by private insurance companies designed to cover excess costs not covered by original Medicare; also called Medicare Supplement Insurance.
ORIGINAL MEDICARE – Term referring to Medicare Parts A and B; also called traditional Medicare.
MEDICAID – A joint federal and state program that helps with medical costs for some people with limited financial resources

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