Why & when to get Medicare?

Dr K C Gupta, YBB Personal Finance

Many keep working until the MEDICARE health insurance kicks in & then retire. But rules are complex & serious mistakes can be made with consequences of lifelong penalties. So, pay attention to these details.

The Medicare ELIGIBILITY age is 65 but it may be delayed if working & covered by work group insurance. Part A is free with at least 40 WORK-CREDITS; a maximum of 4 work-credits per year are possible. If you aren’t eligible based on your work record, you may gain eligibility when your eligible younger spouse turns 62. There are stiff lifelong PENALTIES for delayed signup for Medicare. COBRA & RETIREE insurance don’t count for delaying Medicare.

The Medicare ENROLLMENT is through SSA within a +/- 3-month window around age 65. Login access to SSA & Medicare websites are possible only after respective approvals. There is AUTO SIGNUP for Medicare at 65 if you are already getting Social Security early at ages 62-65. You may decline if you have group health insurance through work, but the default is acceptance. All others need to apply for Medicare through SSA. The open annual enrollment period (AEP or OEP) is October 15-December 7 to make changes in any existing Medicare plan; there is also MA-OEP January 1-March 31 to make changes in existing MAPD plans.

Enrollment beyond normal signup at 65 is tricky. Special enrollment period (SEP) signups are allowed when switching from work group health insurance to Medicare. All others who missed a timely signup must use the annual general enrollment period (GEP) signup window (January 1-March 31, with coverage effective on July 1). You must rely on COBRA or private insurance until Medicare becomes effective.

The ORIGINAL Medicare includes hospital/ surgical Part A, physician Part B, prescriptions Part D. It covers only about 80%, so you must also buy MEDIGAP insurance. Plan G has the best coverage & the highest price; Plan N may also be acceptable; the old (best) Plan F is now closed to new people. These plans are standardized for coverage, but not for prices. At 65+, Medicare may become the primary insurance for employees & retirees in group plans & the employer group insurance may become the supplemental insurance (instead of the Medigap). You will have to carry 3 ID cards. Don’t laminate the Medicare card.

MEDICARE ADVANTAGE (MA or MAPD) is a combined plan (Part C) that includes Part A, B, D, & possibly eye &/or dental coverages. Medicare pays private insurers under contracts to provide standard Medicare services under MA. The MAPD-HMO & MAPD-PPO (flexible) options are available. You (& your spouse) must have Part A & B to signup for MAPD. Large employers may have special MAPD plans with payroll/ pension deductions. Only one ID card is needed with MAPD (don’t use your Medicare card).

Medicare HOLD-HARMLESS provision will limit Medicare premium increases to Social Security COLA for those having Medicare premiums deducted from Social Security payments.

IRMAA for high income earners apply to Part B & D premiums. Medicare is subsidized & premiums are higher in quantum steps for those with higher incomes. Income (MAGI = AGI + tax-exempt interest) from 2 years prior is considered. Medicare announces income related annual premiums based on the percentage of its estimated costs per person. IRMAA tiers are at the cost levels of 25% (basic premium with 75% subsidy, no IRMAA), 35%, 50%, 65%, 80%, 85% (highest premium with 15% subsidy). Appeals are possible if there are sudden changes in income.

Beyond the initial free-look periods, Medigap switches or enrollments require medical underwriting. This is what makes the later switches from MAPD to original Medicare difficult. But there are a few exceptions; several states also require Medigap on guaranteed-issue basis. Except for short transitions, one cannot have both Medigap & MAPD.

PREMIUMS must be paid to the SSA for Parts B & D (including IRMAA payments & late-penalties); when using MAPD (Part C), Part B premium & all IRMAA (for Part B & D) must be paid to Medicare. Once the Social Security payments start, all direct Medicare premiums will be deducted from those payments; otherwise, there may be monthly or quarterly billings. The Medigap premium or the additional premium for MAPD goes to the insurer. Make another family member aware of all Medicare related premium payments to avoid accidental coverage lapses.

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