10
surprising facts about Medicare
More than 55 million Americans rely on
Medicare for their health care coverage. Every day, another 10,000 people turn
65, making them eligible for the government-provided health insurance program.
But the rules are complicated, and what you don’t know can hurt you.
1) Medicare
is mandatory
Surprised? It’s true. Once you turn 65 and are
collecting Social Security benefits, you must enroll in
Medicare Part A, which covers hospital costs. If you don’t want to enroll in
Medicare, then you must repay your Social Security benefits. Medicare A is free
for most people who have worked at least 10 years to earn the minimum 40
credits required for coverage or who are married to someone who is eligible for
Medicare. If you are not yet collecting Social Security, you can delay
enrolling in Medicare penalty-free under certain conditions.
2) No more HSA contributions
Once you enroll in Medicare, you can no longer
contribute to a health savings account (HSA), although you can continue to take
tax-free distributions from your HSA to pay for medical expenses. For some
older workers, it can be a tough choice between signing up for Medicare
coverage or continuing to make tax-deductible contributions to an HSA. You
can’t do both.
3) Procrastinators
pay dearly
Your initial enrollment period (IEP) to sign
up for Medicare Part B, which covers outpatient services and doctors’ fees,
begins three months before your 65th birthday, includes your birthday month and
extends three months beyond that. Miss that seven-month window and you will pay
a delayed enrollment penalty of 10% per year for each year you were eligible
but failed to enroll. Wait until 70 to enroll, for example, and that five-year
delay will cost you an extra 50% of the standard Part B premium every month you
are enrolled in Medicare. There is also a 1% per month delayed enrollment
penalty for Medicare prescription drug plans.
4) Work
longer and skip the penalties
Working longer is a valid reason to skip
enrolling in Medicare at 65. If you or your spouse are covered by a group
health insurance through a current employer or union, you can delay enrolling
in Medicare penalty-free. You have eight months after that insurance coverage
ends to sign up for Medicare during a special enrollment period (SEP). Retiree
health coverage does not count as creditable coverage but can be used as a
supplemental Medigap insurance plan to fill the gaps in Medicare coverage.
5) Medicare
has a lot of gaps
Medicare doesn't cover everything. If you need
certain services Medicare doesn't cover, you'll have to pay for them yourself
unless you have other insurance that covers them. Even if Medicare covers a
service or item, you generally have to pay your deductible, coinsurance and
copayments. That’s where Medigap coverage comes in. Some of the items and
services that Medicare doesn't cover include services typically used by older
people such as long-term care, most dental care, eye exams and eyeglasses,
dentures, hearing aids and routine foot care.
6) Living abroad is no excuse
Medicare coverage is only valid in the United
States. That means older Americans living and working overseas face a tough
decision: to enroll in Medicare and pay Part B premiums that they can’t use
outside the U.S. or wait until they return stateside and pay substantial
penalties for delayed enrollment. Coverage through a foreign health system does
not count as creditable coverage to avoid Medicare’s late-enrollment penalties.
7) Dawdlers may have to wait a long time to
enroll
In addition to paying a late-enrollment
penalty for life, those who miss their initial enrollment period may have to
wait a year or more to enroll in Medicare. They can sign up only during the
general enrollment period, which runs from January through March each year for
Medicare coverage that begins the following July 1. So, an ex-pat who returns
to the States in June 2017 would have to wait until January 2018 to enroll in
Medicare for coverage to begin on July 1, 2018. In the meantime, he would be
responsible for all of his medical expenses.
8) Income
determines Medicare premiums
Although most people who enroll in Medicare
Part B in 2017 pay the standard monthly premium of $134 per month, high-income
retirees pay more. Individuals with modified adjusted gross incomes (MAGI) of
$85,000 or more and married couples with MAGI topping $170,000, pay monthly
premiums, including surcharges, ranging from $187.50 to $428.60 per month per
person. Premiums are based on the latest available tax return, so 2017 Medicare
premiums reflect income reported on 2015 federal income taxes.
9) Income brackets change next year
Starting in 2018, Medicare premiums will
undergo some major changes. The top three income tiers that determine Medicare
premiums will be compressed so that higher premiums are triggered at lower
income levels than are in effect today. Those premiums, which will be announced
this fall, will be based on 2016 income tax returns.
10) High-income
premiums can be appealed
If your income has declined since the last
available tax return due to a life-changing event such as retirement, divorce
or death of a spouse, you can appeal the high-income surcharge. Follow the
instructions on the letter you receive announcing your income-related monthly
adjustment amount. However, if your income spiked for other reasons, such as
large investment gains or the sale of a second home, you must pay the higher
premium in 2018. But don’t worry; Medicare premiums are reset each year and if
your income drops, so will your future premiums.
