A Guide to Medicare in 2019
In America, you become eligible for Medicare at age 65 even if you are still working. This can create some complicated choices and many boomers who are still working are often unsure of what they should sign up for and what they should postpone.
In this post, we’ll go over the basics of Medicare that any Medicare newbie should know and also cover how Medicare coordinates with employer coverage so that you’ll know your options if you still have access to employer group coverage.
Your Original Medicare benefits are made up of Part A and Part B. These are the two parts of Medicare that you’ll sign up for through Social Security or through the Railroad Retirement Board if you are a railroad retiree.
Part A is your hospital coverage and it will take care of your inpatient stays, skilled nursing, blood transfusions, and hospice benefits. Part A costs nothing for most people at age 65 because most of us pay taxes during our working years toward these future benefits.
Part B is your outpatient coverage and it covers pretty much everything else that is medically necessary. This includes doctor’s visits, lab testing and diagnostics, medical equipment and supplies, outpatient surgeries, physical therapy, chemotherapy, radiation, dialysis, emergency care and much more.
Beneficiaries pay a premium for Part B and in 2019, the standard base premium is $135.50/month. However, some individuals with higher incomes pay more based on that income. You can find a chart here that outlines those income brackets and their corresponding Part B premiums.
Medicare also has a voluntary drug program called Part D. If you would like coverage for outpatient prescriptions, then you can enroll in a Part D drug plan through a private insurance carrier. Though your coverage comes from the insurance company, Medicare tracks your enrollment.
This coverage is considered optional because some people have other means of drug coverage, such as through the VA, and may not need to enroll in drug coverage.
Enrollment and Penalties
The time to sign up for Medicare is at age 65, regardless of whether you are enrolling in Social Security benefits yet. Our government gives you a 7-month window surrounding your birthday month during which you can sign up for Parts A, B, and D.
You must sign up during this window unless you have other creditable health insurance coverage, such as through a large employer. If you don’t enroll and you don’t have creditable coverage, you’ll be subject to late enrollment penalties. You’ll pay a 10% late enrollment penalty for Part B for every year that you wait to enroll, so the penalty grows larger with time.
Likewise, if you fail to enroll in Part D and you don’t have another means of creditable drug coverage, you will also incur a cumulative late penalty equivalent to 1% per month for every month that you’ve waited. Once you do finally enroll, you’ll pay that penalty for as long as you remain enrolled in drug coverage.
Gaps in Medicare
Some individuals mistakenly believe that when they turn 65 their Medicare coverage will cover 100% of all their healthcare services. This is just not the case. You are responsible to pay cost-sharing toward most medical services. This comes in the forms of deductibles, copays, and coinsurance on both Parts A and Part B.
Part B only covers about 80% of your outpatient costs and so you can rack up significant bills for big-ticket items like chemotherapy or knee replacements. For this reason, most people enroll in supplemental coverage to help them close the gaps in Medicare. There are two types of coverage to choose from: Medicare Supplements and Medicare Advantage plans.
While these two types of coverage work differently, both will help to reduce your out-of-pocket expenses for your covered healthcare services. We’ll be covering both of these options in depth in a future article here on Workforce50.com.
Some individuals may not yet need supplemental coverage because they are still working. They have the option to let Medicare coordinate with their employer group health coverage.
Medicare and Employer Coverage
People still working at 65 face some choices. They can leave their group coverage and transition over to Medicare as their primary coverage and pick up some supplemental and drug coverage.
Their other option is to stay enrolled in their group health coverage but let It coordinate with Medicare to reduce your overall out of pocket expenses for healthcare services.
When you work for a large employer with over 20 employees, that employer coverage will be primary, and Medicare will be secondary. In this scenario, you may decide to enroll in Part A since it costs nothing for most people. You can delay Parts B and D until you retire since your group coverage likely already offers outpatient and drug coverage. This allows you to postpone paying the premiums associated with Parts B and D.
Later when you retire, you’ll be given a Special Enrollment Period to add Parts B and D without penalty.
When you work for a small employer, on the other hand, your Medicare is primary, and the group coverage is secondary. This means that you must enroll in both Parts A and B at 65 or else you’ll incur a late penalty later on.
Now that we’ve covered the basics of Medicare, you may have additional questions. You can email your questions to the Workforce50 publisher. Be sure to also check out our future articles about Medicare in which we’ll dive into topics like supplemental choices, the benefits of a Part D drug plan, why you really need supplemental coverage and how to help your aging parent with their Medicare choices.