If you, or someone you know, have turned 65 recently, you may have been surprised by the number of mailings and phone calls you have received. The inundation of unsolicited marketing usually does very little to clear up the confusion and “madness” surrounding what someone needs to do when they turn 65.
The seemingly relentless marketing at senior citizens is driven by the fact that an average of 10,000 people turn 65 every day in the United States and become eligible for the Medicare Federal health insurance program. This trend started on January 1, 2011 when the first Baby Boomers started turning 65 and it is expected to continue through the year 2030. By the time the last Baby Boomer turns 65, it is estimated that nearly a quarter of the population will be receiving Medicare benefits. Medicare, along with Social Security, is an entitlement program that plays an important role in the retirement plans for Americans, yet many people are confused about how and when to apply and are overwhelmed with the myriad of Medicare plan options. Based on my years of experience, here are the most frequently asked questions about Medicare.
When am I eligible for Medicare?
Medicare eligibility begins at age 65 unless you meet special circumstances such as receiving Social Security disability benefits for 24 months or if you have End Stage Renal Disease. Your Initial Enrollment Period (IEP) is a 7-month window beginning 3 months prior to the month you turn 65, your birthday month, and the 3 months following.
How do I apply for Medicare?
If you are already collecting Social Security benefits when you turn 65, you will automatically be enrolled in Medicare Part A and Part B.
If you are not collecting Social Security benefits when you turn 65, you will need to enroll either online through the Social Security website (www.ssa.gov) or by calling your local Social Security office. Once you are enrolled in Medicare, you can register for an online account through the Medicare website (www.medicare.gov) where you can review your coverage and plan options.
Can I delay enrollment in Medicare and will I have a penalty if I do?
If you continue to work past age 65 and are enrolled under a group health plan, you can delay enrollment into Medicare and enroll at a later date without a penalty. You can also delay enrollment into Medicare if your spouse is actively employed and you are enrolled under your spouse’s employer group health plan.
There are a few points of clarification regarding the ability to delay Medicare without a penalty. First, the employer must have 20 or more employees for the group health plan to be the primary health insurance and secondly, enrollment under a retirement health insurance plan or COBRA continuation of coverage plan does not exempt you from the Medicare penalty.
I typically advise people to enroll in Medicare Part A and decline Medicare Part B if they will continue to be enrolled under an employer’s group health insurance plan past age 65. However, please note that enrollment into Medicare Part A will make you ineligible for any additional contributions into a Health Savings Account (HSA). An HSA is a tax-free savings account that can only be used in conjunction with a Qualified High Deductible Health Plan (QHDHP). HSA funds can be used tax-free to pay for qualified medical expenses and can be carried into retirement.
Many employers offer an optional Flexible Savings Account (FSA) to help cover qualified medical expenses. An FSA is different from an HSA in that FSA funds normally have to be spent during the plan year under a “use it or lose it” policy. If someone enrolls in Medicare Part A, they would still be eligible to contribute to an FSA.
What are the different parts of Medicare?
Medicare has several different parts. Part A has no monthly premium and covers inpatient care in hospitals, short-term rehab in a skilled nursing facility, hospice care, and home health care. Part B has a monthly premium and covers outpatient care such as doctor visits, lab work, diagnostic tests, outpatient surgery, therapies, and preventive care. Medicare Part A and Part B are collectively referred to as “Original” or “Traditional” Medicare. Part D provides coverage for prescription drugs either through a stand-alone Part D plan or through a Part D plan that is included in a Medicare Advantage plan.
Does Medicare cover all my costs?
No. There are deductibles and copays required for certain inpatient services under Part A and Part B only covers 80% of the Medicare allowable amount after a deductible has been met. There is no out-of-pocket limit under Medicare Part A and Part B, so most individuals choose to enroll in a Medicare Supplement (Medigap) plan or Medicare Advantage plan to minimize out-of-pocket costs.
What is a Medicare Supplement (Medigap) plan?
Medicare Supplement (Medigap) plans are available through private insurance companies to “supplement” or fill in the “gaps” of deductibles and copays under Medicare Part A and Part B. Plans are identified by letters (A-N) and each plan is standardized but premiums vary by company. A stand-alone Medicare Part D prescription drug plan must be added to a Medicare Supplement plan. Coverage for routine and preventive dental, vision, and hearing benefits are not included with this coverage, but can be added through non-Medicare stand-alone plan options.
What is a Medicare Advantage plan?
Medicare Advantage plans are available through private insurance companies that contract with Medicare to provide Part A, Part B, and typically, Part D benefits. Advantage plans can also provide additional benefits beyond what Medicare Part A and Part B would cover, such as routine and preventive dental, vision, hearing coverage, as well as health and wellness programs.
What should I do when I turn 65?
I highly recommend reaching out to a local Medicare insurance advisor at least three months in advance of turning 65 or prior to losing your employer group health insurance. This will allow ample time to understand your option and complete the enrollment process. Jon Ebersole is an independent Medicare insurance advisor who provides free education and assistance to individuals to help them select the Medicare plan that best fits their unique needs. You can view more information and educational videos at his website www.medicaremadness.com. Jon can be reached by email at jon@medicaremadness.com or by calling 717-798-1603.
