Medicare has many rules and it’s easy to confuse them or even forget them. However, if you understand a few key facts, your experience in setting up your Medicare coverage will go more smoothly. list will help you in learn the fundamentals of Medicare.
- When You Become Eligible for Medicare
You are eligible for Medicare at 65 even if you are not yet taking Social Security Benefits. When you are taking Social Security benefits and have worked in the United States for at least 10 years, you will be auto enrolled into Part A.
However, just because you aren’t auto enrolled, doesn’t mean you aren’t eligible. People who are not yet taking income benefits should sign up for Medicare by going to the Social Security office, calling the Social Security office, or by mail.
- Not Everyone Needs All Four Parts of Medicare
The four main parts that Medicare consists of are Part A, Part B, Part C, and Part D.
If Medicare will be your primary coverage, you need both Part A and Part B, which is called your Original Medicare. Once this is in place, then you can add on the two other parts if you like. They are voluntary.
Part C is an optional part and is also known as Medicare Advantage. Simply put, you can get your Medicare Part A and B benefits from a private insurance company when you sign up for Medicare Advantage. These plans have networks of providers, so they aren’t for everyone.
Part D is how you receive your Medicare drug coverage. Although this is optional, you can be penalized for not enrolling in it if you don’t have other creditable drug coverage. For example, someone with Indian Tribal Benefits may choose to get their drugs there instead of enrolling in a Part D drug plan.
- You Will Pay for Medicare
Part A is “free” if you have worked at least 10 years in the United States. We use the word “free” loosely because you have actually been paying for it your whole working life in the form of FICA taxes. Once you’ve paid those taxes for the ten years, your Part A will cost you nothing further when you enroll in it.
The rest of Medicare costs money. Each part of Medicare has a monthly premium you must pay in order to keep it. Your Part B outpatient coverage in 2018 costs $134/month for most people. Part D drug plans also have monthly premiums that you will pay.
In order to enroll in a Part C Medicare Advantage plan, you must first be enrolled in (and paying g for) Part B. Some Medicare Advantage plans also have a premium that you pay on top of that.
- If You Have a Higher Income, You May Pay More for Parts B and D
The average person pays $134 a month for Part B and around $35 a month for Part D. In 2018, if you make more than $85,000 a year individually or more than $170,000 filing jointly, you will pay more than the average person for Part B and Part D.
Depending on which income bracket you are placed in, that will determine how much extra you pay a month for Part B and Part D. You can view the income chart and associated premiums here.
- The 7-Month Initial Enrollment Period
Medicare sets a 7-month Initial Enrollment Period for everyone. You should enroll in Medicare during this window unless you have other creditable health insurance coverage, such as through an employer.
This is the allotted time you have to enroll in Part A, Part B, and Part D. If you do not have other coverage and you do not enroll in Part B and Part D during this period, you will be penalized once you finally do enroll
- You Can Be Penalized for Enrolling Late
Like we have mentioned, you can be penalized for not enrolling in Part B and Part D on time. The penalties you accumulate over time get added to your monthly premiums and stay there forever.
Part B’s penalty is determined by how many years you go without coverage. Your normal monthly premium plus the number of years you went without coverage times 10% equals your new monthly premium.
Part D’s penalty is determined by how many months you go without coverage. Your penalty will be 1% of the national average Part D premium times the number of months you went without coverage.
- If You Have Creditable Coverage You Can Delay Enrollment
The only time you don’t get penalized for not enrolling Part B and Part D is if you have creditable coverage. The most popular way to have creditable coverage is by working for an employer that has 20 or more employees.
If you work for a large employer, you can delay enrolling in Medicare until you retire without being penalized.
- You Have to Enroll in Medicare If You Have COBRA
COBRA, however, is not creditable coverage. If you choose to continue your employer coverage after retiring through COBRA, you are required to enroll in Part B within 8 months of you last day at work.
If you fail to enroll in Part B during this time, you will be penalized when you do join. Your enrollment date may also be delayed, which can leave you without coverage for months.
- You Can Change Your Part D Plan During AEP
If you have a Part D drug plan or a Medicare Advantage plan you can make changes during the Annual Election Period (AEP). AEP begins October 15th each year and end December 7th each year. If you decide to change your Part D plan or your Medicare Advantage plan during this time, the effective date of those changes will be January 1st of the following year.
- There Isn’t Underwriting During Medigap OEP
Normally, applying for a Medigap plan requires you to go through medical underwriting. However, each Medicare beneficiary gets an Open Enrollment Period (OEP) of six months where they can enroll in a Medigap plan without having to answer any health questions at all.
If you miss the Open Enrollment Period and try to apply for a Medigap plan, you will have to answer health questions in most states and may be denied coverage depending on your answers.
- You Can Take Your Medigap Plan with You
Many people move after retirement to be closer to family and friends. If you enrolled in a traditional Medicare supplement (Medigap plan), you can take your policy with you. It can be used anywhere in the nation, giving you access to nearly a million providers.