Each day approximately 10,000 Americans reach the age of 65. While this is cause for celebration, some Americans are finding that the challenges of signing up for Medicare are taking some of the life out of the party. Many are finding that Medicare can be more costly than their current health plan and that there are specific Medicare deadlines that if missed will affect them financially for the rest of their lives. Below, we’ve answered a few of the most frequently asked questions. We have an additional article on Income-Related Monthly Adjustment Amounts (IRMAAs). If you have additional questions, feel free to give us a call.
I’m still working. Do I need to sign up for Medicare?
Three months before your 65th birthday, reach out to your Human Resources department and talk to them about the coordination of your current health insurance policy and Medicare. Ask if the coverage you currently have is considered “credible coverage.” The coordination of benefits is determined by the number of employees participating in your employer’s health care plan.
If you work for a company with fewer than 20 employees, then you will need to enroll in Medicare. These plans usually require you to enroll in Medicare and have Medicare be the primary payer.
If you work for a company with more than 20 employees, then you will need to let Social Security Administration know that you are declining Medicare Parts A and B at this time because you are working and covered by credible coverage. Document the time and date of the phone call along with the name of the person you spoke with. (If you do not make contributions to an HSA plan, have filed for social security benefits, or “Filed and Suspended” your social security benefit, you need to start Medicare Part A and decline only Part B.)
Once I retire, can I pay for COBRA for 18 months and then start Medicare?
If you are over age 65 and retire, you have eight months to sign up for Medicare. If you do not sign up during that time, you will pay a penalty for the rest of your life! COBRA is not considered “credible coverage” and therefore does not extend the amount of time you have to sign up for Medicare once you retire.
I have an HSA account. How is it affected by Medicare?
If you make contributions to an HSA, you must stop all contributions six months prior to starting Medicare. The amount of contributions you make for that tax year is the maximum contribution divided by 12 and then multiplied by the number of months you were eligible to make contributions. This does not include the six months prior to starting Medicare.
HSA withdrawals can be used to pay premiums for Medicare Part B, Part D prescription coverage and a Medicare Advantage Plan. Premiums for supplemental (also called Medi-gap) plans cannot be paid from HSA money.
How are Medicare and Social Security related?
If you are receiving payments from Social Security for retirement or disability when you turn 65, you will be automatically enrolled in Medicare Part A and Part B. If you do not want to start Medicare (see above questions on the subject of deferring) you need to call the Social Security office three months before your birthday and tell them you want to decline Part B. Please document the time and date of the call and the person you spoke to. You cannot decline Part A without stopping your social security benefits and paying back the benefits you have received.
If you are not receiving payments from Social Security at age 65, you must sign up for Medicare or you must call Social Security and decline coverage.
You should only decline Medicare Part A and B if you have “credible coverage” through either your or your spouse’s employer.
Help! I’m so confused I don’t know what to do or what questions to ask!
If you’ve reach this section and we haven’t answered your questions or you are confused as to what to do next, please give us a call. We are happy to walk you through the process and if necessary we can meet with you and our Medicare expert to help steer you in the right direction.
Medicare Part A (Hospital Insurance)
Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care.
Medicare Part B (Medical Insurance)
Part B covers certain doctors’ services, outpatient care, medical supplies, and preventive services.
Medicare Part C (Medicare Advantage Plans)
A type of Medicare health plan offered by a private company that contracts with Medicare to provide you with all your Part A and Part B benefits. Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans. If you’re enrolled in a Medicare Advantage Plan, most Medicare services are covered through the plan and aren’t paid for under Original Medicare. Most Medicare Advantage Plans offer prescription drug coverage.
Medicare Part D (prescription drug coverage)
Part D adds prescription drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-for-Service Plans, and Medicare Medical Savings Account Plans. These plans are offered by insurance companies and other private companies approved by Medicare. Medicare Advantage Plans may also offer prescription drug coverage that follows the same rules as Medicare Prescription Drug Plans.
Medicare Supplement Insurance (Medigap)
A Medicare Supplement Insurance (Medigap) policy, sold by private companies, can help pay some of the health care costs that Original Medicare doesn’t cover, like copayments, coinsurance, and deductibles.
Some Medigap policies also offer coverage for services that Original Medicare doesn’t cover, like medical care when you travel outside the U.S. If you have Original Medicare and you buy a Medigap policy, Medicare will pay its share of the Medicare-approved amount for covered health care costs. Then your Medigap policy pays its share.
A Medigap policy is different from a Medicare Advantage Plan. Those plans are ways to get Medicare benefits, while a Medigap policy only supplements your Original Medicare benefits.
Eight things to know about Medigap policies
You must have Medicare Part A and Part B.
If you have a Medicare Advantage Plan, you can apply for a Medigap policy, but make sure you can leave the Medicare Advantage Plan before your Medigap policy begins.
You pay the private insurance company a monthly premium for your Medigap policy in addition to the monthly Part B premium that you pay to Medicare.
A Medigap policy only covers one person. If you and your spouse both want Medigap coverage, you’ll each have to buy separate policies.
You can buy a Medigap policy from any insurance company that’s licensed in your state to sell one.
Any standardized Medigap policy is guaranteed renewable even if you have health problems. This means the insurance company can’t cancel your Medigap policy as long as you pay the premium.
Some Medigap policies sold in the past cover prescription drugs, but Medigap policies sold after January 1, 2006 aren’t allowed to include prescription drug coverage. If you want prescription drug coverage, you can join a Medicare Prescription Drug Plan (Part D).
It’s illegal for anyone to sell you a Medigap policy if you have a Medicare Medical Savings Account (MSA) Plan.
This information is believed to be accurate but should not be used as specific investment or tax advice. You should always consult your tax professional or other advisors before acting on the ideas presented here.