One of the most complex issues you will face when you reach age 65 is what to do about Medicare. Medicare is the federal health insurance program available to older Americans. Most of us have been paying into this program during our entire working lives as part of the payroll tax deducted from our paychecks. You become eligible when you reach age 65 and are eligible for Social Security. You can be eligible for Medicare under age 65 if you have been receiving Social Security disability (SSDI) for at least 24 months.
If you are eligible for Social Security retirement benefits but do not take them at age 65, or if you are working after age 65, you can still receive Medicare benefits. If you are not eligible for Social Security or railroad retirement, you are eligible for Medicare if you meet residency and citizenship requirements, but you must pay Part A premiums. How much you pay for Part A depends on your work history (how long you paid Medicare taxes while working).
Medicare is divided into three parts: Part A, Part B, and Part D. In general terms, Part A covers hospital related expenses. Part B covers doctor’s services and outpatient medical services, laboratory tests, X‑rays, and therapy. Part D is the prescription drug benefit. The first step to enjoying the full benefits of the Medicare system is to understand how the programs work.
Enrollment in Medicare is automatic for most people and does not require an application if you already get Social Security benefits. If you qualify for Social Security benefits but are not receiving them when you turn 65 you will need to enroll in Medicare by filing an application. You can file an enrollment application during the seven-month period surrounding the month of your 65th birthday. This period includes the three months before your birthday month, your birthday month, and the three months after your birthday month. If you miss your initial enrollment period, you may enroll between January and March 31 each year, but you may pay a penalty for late enrollment. Your Medicare coverage will start on July 1 of the year you enroll.
Medicare Part A coverage is free if you are 65 or older and eligible for Social Security. Those that have paid into Social Security but do not have the 40 quarters of earnings to qualify pay a premium based on the number of quarters they have worked. There is an exception for those who are disabled and qualify for SSDI.
Medicare covers most health care services that you and your doctor think you need. Most doctors accept Medicare. Doctors do not have to treat Medicare patients, but if they do, they are legally bound to file claims with Medicare and to charge no more than state and federal laws permit. Medicare will pay the doctor 80% of its approved amount, and you are responsible only for the remaining 20%. Doctors who do not take assignment can charge you up to 15% more than Medicare’s approved amount so you should always ask if they will take the assignment.
Everyone pays a monthly premium for Medicare Part B. The standard Medicare Part B monthly premium is $99.90 per month in 2012. For most people this is a $3.50 increase over the 2011 premium. Part B premiums will usually only be increased in years that Social Security benefits are also increased. If you began having your premium deducted in 2011, you will pay $115.40 each month in 2012 for Part B.
People with very high incomes will pay a higher Part B premium.
Medicare Part D coverage is only available through Medicare private drug plans. Enrollment in Part D is optional for most people since the economics of this benefit will depend on your current drug coverage and drug needs. Start by checking the plan you currently have to see how it will coordinate with Medicare. There are situations where having Part D could cause you or your family members to lose other health care coverage. If your current drug coverage is as good as or better than Part D you can keep it without penalty. There is a penalty to enroll later if you do not have coverage and do not enroll when you are first eligible.
You will need to choose a plan that works with your current Medicare health benefits when you enroll in Part D. Original Medicare coverage requires you to choose a stand-alone plan that offers just drug coverage (PDP). A Medicare Advantage plan (Medicare private health plan) typically will offer drug coverage as part of your plan’s benefits package. Each plan has different costs and a different menu of drugs that are covered through different pharmacies.
Enrollment in Part D can begin when you first become eligible for Medicare and enroll in Medicare Parts A or B. Changing your Part D plan can only be done during the Fall Open Enrollment. This year the open enrollment will be from October 15th to December 7th.
Understanding the basics of Medicare A, B, and D gives you good standing to take necessary steps on schedule. It also helps you deal with problems in the system when you must. For more information on Medicare visit their website at Medicare.gov.
- Enroll in Part B in advance of your 65th birthday to avoid penalties for missing the initial sign up period.
- Ask healthcare providers if they will take Medicare assignment in advance to assure you are only charged the minimum copays.
- Check your current health plan to see how it will coordinate with Medicare before enrolling in Part D.