Medicare….what is Medicare all about? Some common thoughts are that:
- it is basic health insurance for those over 65
- it is run by the federal agency Dept. of Health and Human Services (HHS)
- it has several parts–Part A, Part B, Part C, and Part D
All of the above are true, but it is a bit more complicated. For those of us who are closer to retirement age, now is the time to find out what you need to know about Medicare so that common mistakes can be avoided and the right choices can be made. Continue reading so you will not be in the dark in regards to how Medicare works.
Medicare’s Puzzle Pieces
Before discussing the common misconceptions about medicare, I want to give you a brief description about the 4 components (parts) that make up the total Medicare package.
This portion of Medicare is the one that pays for hospital stays, skilled nursing facilities, and hospice stays. Monthly premiums are not required as long as sufficient funds were paid through Medicare payroll taxes. Otherwise, Part A premiums can be purchased with monthly premiums.
This portion helps pay for doctors’ services both inpatient and outpatient as well as lab services, medical equipment and supplies. You must pay monthly premiums for Part B unless your income qualifies you for state assistance. Medicare usually pays 80% of the cost while you pay for 20%, unless you have supplemental insurance which covers these expenses.
This portion provides an alternative way to receive Medicare services. The services are provided through Medicare Advantage, which is run by private managed-care plans such as HMO’s and PPO’s. These plans are required to cover the same services as the traditional Medicare (Parts A and B), but charge lower copayments. Some of these plans may also offer prescription drug coverage (Part D) as well as dental, vision, and hearing care. However, Medicare Advantage plans may restrict your choice of doctors and other providers by requiring higher copayments if you choose providers that are out of network.
This portion pays for your prescription drugs that are for home use. This coverage can be received in one of two ways:
- by joining a private stand-alone Part D plan for an additional monthly premium if you are enrolled in the traditional Medicare plan, or
- by joining a Medicare Advantage plan that includes Part D coverage in its benefits package
Common Misconceptions Regarding Medicare Enrollment
As our population is aging, Medicare enrollment will become (if it isn’t already) important for hundreds of people to know how and when to enroll. The problem is that many people who have already enrolled in Medicare end up either paying more than they should, or in some cases forced to go without coverage for several months– simply because they did not know all of the rules regarding Medicare. Here are some common myths and misconceptions about Medicare and what can be done to avoid any problems down the road.
Myth #1: You don’t qualify if you have not worked long enough
40 credits (equivalent to 10 years of work) are needed to get Part A coverage without having to pay any premiums. You earn the 40 credits through payroll taxes from work instead. Work credits are not needed for Parts B and D coverage. However, you need to be age 65 or older AND a US citizen or legal resident who has lived in the US for at least 5 years. In addition, you can also qualify for Part A on your spouse’s work record, or you can choose to pay the premiums. If you decide to wait until you have 40 credits before signing up for Medicare, you may end up paying permanent late penalties.
Myth #2: Failing to enroll in Part B at the right time
It is very important that you sign up for Part B at the right time because if you do not, you may end up paying late penalties in the form of surcharges on your premiums for all future years. Coverage can also be delayed for several months before becoming active. However, you may delay–without penalty–signing up for Part B if you are still working after age 65 for an employer that is providing health benefits. Otherwise, the critical time to sign up for Part B is during your seven-month initial enrollment period–this includes the month you turn 65 years old, 3 months before and 3 months after.
Myth #3: Medicare Part B is not needed if you have either COBRA health or retiree coverage
Remember that Part B is optional; you do not have to enroll. However, you should check your retiree plan to see how it fits in with Medicare. In other words, your plan may have Medicare listed automatically as the primary coverage and the plan may also pay for a few other services that Medicare does not cover. If you have a plan like this and fail to sign up for Part B when you are required to, then you will not have Part B coverage. COBRA allows you to continue receiving health benefits from your former employer for 18 months after your job ends. As soon as you are no longer working, COBRA coverage does not allow you to delay Part B enrollment without incurring late penalties. Therefore, you should sign up for Part B before the end of your initial enrollment period at age 65 (if your job ended after that period) or no later than 8 months after you stopped working.
Myth#4: You must wait until you reach full retirement age to sign up for Medicare
Full retirement age for most people is 66. However, this will increase to 67 for those who were born after 1959. To avoid being charged late penalti es, you should sign up for Medicare at age 65, unless you are still working and are covered by your employer’s health plan or your spouse’s current place of employment. It is not necessary to wait until you actually retire and start collecting Social Security before enrolling in Medicare.
Myth #5: Part D is not necessary if you are not taking any prescription drugs
That may be true today, but what about tomorrow? Next week or next year? How do you know that in the future you won’t be afflicted with an illness that requires an expensive drug for treatment? As with any insurance, it is best to get it when you don’t need it. Otherwise, Part D does not allow you to sign up for it when the need becomes urgent without incurring late penalty fees being added to the premiums–unless you have creditable coverage elsewhere (such as retiree benefits) that Medicare considers comparable to what Part D covers. If you do not have retiree benefit coverage, the best solution would be to choose a plan with the lowest premium so you will be covered with the least cost. Bottom line–it’s better to be safe than sorry.
Myth #6: You can only enroll during “open enrollment” periods
You might have heard several times the phrase “open enrollment” for Medicare and assume that this is the only time that you can enroll in Medicare for the first time. Not true–this enrollment period ( Oct. 15th to Dec. 7th each year) only applies to those who are already enrolled in Medicare and wish to change their coverage for the following year. First time Medicare enrollees have their own separate enrollment periods:
- around the time you reach age 65
- throughout the time you have health coverage from either your employer or your spouse’s employer
- eight months after your employment ends
Waiting for open enrollment will increase the risk of incurring delayed coverage and permanent late penalties. There are some special circumstances where there are different enrollment periods for those who qualify for Medicare due to disability or for legal immigrants.
Myth#7: Choosing a Part D plan just because of its premium or it’s what other people chose
The best way to select the best Part D plan is according to what specific prescription drugs you are taking. You must be aware that not all Part D plans cover all drugs and the copays can vary widely among plans even for the same drugs. Go to medicare.gov website’s plan finder program to compare the coverage and costs for Part D plans. Or you can call Medicare at 1-800-633-4227.
It is my sincere hope that whether or not you either already have Medicare or are ready to enroll in Medicare, you now have more information at your fingertips to make the best decisions. Having as much information as you possibly can is the best offense in terms of making wise choices regarding Medicare. However, don’t become a victim of “analysis paralysis” when you gather so much information that you end up confusing yourself to the point that you end up doing nothing. Remember, you can always go to the following websites for assistance: