Medicare: What Is It and Why Do I Need to Apply Right at 65?

Many of our clients, especially those who have retired early or are self-employed as they approach retirement, cannot wait to reach the eligible age for Medicare.  For those paying completely out-of-pocket for private health insurance, Medicare generally represents a big discount in their monthly premiums.  However, many others–both in the early stages of their career and the later stages–still have questions and misunderstandings about Medicare, so we offer the following brief primer below.

Who.  Medicare is available for Americans who are over age 65, who are under 65 and have received disability benefits from Social Security or the Railroad Retirement Board (RRB) for 24 months, who have ALS (Amyotrophic Lateral Sclerosis, or Lou Gehrig’s disease) and are receiving Social Security disability benefits, or who have ESRD (End Stage Renal Disease).  This is completely distinct from Medicaid, which provides health benefits for those with low income and assets.

What.  Medicare provides several different types of health insurance:  Part A (Hospital Insurance) helps cover inpatient care in hospitals as well as skilled nursing facility, hospice, or home health care.  Part B (Medical Insurance) helps cover services from doctors and other health care providers, outpatient care, durable medical equipment, and some preventative services.  Part D helps cover the cost of prescription drugs.  Generally, you do not need to pay a monthly premium for Part A if you or your spouse paid Medicare taxes while you were working.  For Part B, the standard monthly premium is $121.80 in 2016, though it could be higher depending on your income level.  The Part D premium varies based on your selected plan.

In addition to these basic components of Medicare, most Medicare participants also obtain a supplementary health insurance policy to help pay for medical expenses beyond the limits of Medicare coverage.  If you or your spouse are still working, you could potentially use the employer-provided health insurance for this purpose.  Otherwise, you may want to obtain a Medicare Supplemental Insurance (Medigap) policy or a Medicare Advantage Plan (known as Medicare Part C).

When/Where.  If you are already receiving Social Security or RRB benefits, you will be automatically enrolled in Medicare Part A and Part B, and you will receive a Medicare card in the mail 3 months before you turn age 65 (or on the 25^th month of receiving Social Security disability benefits).  If you are not receiving either of those benefits, you need to enroll (either online, by phone, or at your local Social Security office) during a 7-month initial enrollment period that starts 3 months before the month you turn 65 and ends 3 months after the month you turn 65.  For Medicare Part C and Part D, you can enroll either during the initial 7-month period or during the annual open enrollment period from October 15^th to December 7^th.

Why.  If you do not sign up for Part B when you are first eligible, you will likely have to wait to enroll during the General Enrollment Period (from January 1 to March 31), and coverage will not start until July 1^st.  In addition, you will generally have to pay a late enrollment penalty, which is applied monthly for the rest of your life.  Your monthly premium may increase 10% for each 12-month period that you could have had Part B but did not sign up for it.  There is no penalty, however, if you sign up while you or your spouse are still working and are covered under an employer or union health plan.  If you plan to work past age 65, you should contact your health plan administrator to find out how your coverage works with Medicare.  There is no penalty for late enrollment to Part A, Part C, or Part D.

If you have questions about Medicare, please give us a call and we’ll help walk you through the process!