6 Things You Need to Know About Medicare
- The “four parts” of Medicare
- How to enroll
- Are you eligible if still working?
- What about drug coverage?
- What if you’re retiring and losing health insurance?
- When you can lower your premiums when your income goes down
Professors Give Themselves a "B" for Financial Literacy
College professors take great pride in helping students learn new concepts. But according to Fidelity Investments’ 2017 Higher Education Faculty Study, when it comes to grading their own financial literacy, professors admit they’d give themselves a “B” grade.
When asked where they need financial help, the top response among professors was understanding Medicare/health care costs — inspiring us to produce this educational report for the benefit of all professors.
Medicare is a government-run program designed to provide health care for those age 65 and older. Currently 54 million Americans are covered by the program. While this equates to roughly one in six Americans, everyone will be impacted by the program either now or in the future. This report outlines program highlights, along with the pitfalls that may affect special circumstances.
Medicare was signed into law in 1965 with Harry S. Truman as the first recipient on July 1, 1966. It was only fitting, since Truman originally proposed this plan to congress in 1945.
There are Four Parts to Medicare
- Medicare Part A includes coverage for the hospital and associated costs for inpatient care. There is a deductible for each benefit period associated with a hospital stay along with a coinsurance amount. As long as you’ve paid into the system for 40 quarters, there’s no monthly premium for Part A.
- Medicare Part B generally covers doctors and services outside of the hospital. You’ll pay a small deductible, which is based on income, and then are responsible for 20 percent of the Medicare approved amount for most doctor’s services, durable medical equipment, and outpatient care. Unlike Medicare Part A, there is a monthly premium for Medicare Part B.
- Medicare Part A and B are thought of as original Medicare and have no limits to the amount you may spend out of pocket. As a result most people add either a Medigap policy or Medicare Advantage Plan (Part C).
- Medicare Part D refers to the prescription drug program. The program is run by private companies and includes co-payments and deductibles. Making sure your prescriptions are covered is very important. The Medicare.gov website provides functionality for entering your prescriptions in order to find the best coverage options for your particular situation. This is where many people start.
a. Medigap policies allow you to see any doctors and hospitals that participate in Medicare, but these plans typically do not offer a prescription drug plan. You must purchase this separately.
b. Medicare Advantage plans (Part C) is similar to an HMO or PPO in that the services you receive are provided by specific hospital and doctor networks. Medicare Advantage plans typically include a prescription drug plan.
Both types of policies help to cover the deductibles and co-payments that Medicare Part A and Part B don’t cover. There are many options under both types of plans and the amount you pay will be determined by the type of policy you choose.
How Do I Enroll in the Program?
If you’re enrolled in Social Security at age 65, Medicare will automatically enroll you in part A and Part B. You’ll receive your red, white, and blue Medicare card in the mail and they’ll deduct your part B premiums from your Social Security check. If you’re not enrolled in Social Security at age 65, Medicare will not send you a notice. The enrollment period is the 7 months surrounding your 65th birthday and includes the three months prior to the month of your birthday, the month of your birthday, and three months following your birthday month.
Three Enrollment Options:
- Online Application
- Calling Social Security
- Going into the Social Security office
What if I’m Still Working?
If you’re still employed at age 65 and have a health plan at work, Medicare will typically act as the secondary payer. It’s important that you have a conversation with your benefits office in order to confirm this. You’ll also want to ask your benefits office if their drug coverage is considered “creditable” or equal to the coverage under Medicare. If you use drug coverage that’s not considered “creditable” you’ll be considered to have missed your enrollment period and be subject to delays and penalties.
If Medicare is acting as the secondary payer there’s little reason to pay for Medicare Part B. Part A is free, so if you don’t have a high deductible health plan (HDHP) with a health saving account (HSA) you can sign up for Part A.
If you have a high deductible health plan with a health savings account you won’t be able to sign up for Part A or B. IRS rules say that you can't contribute to an HSA if you're enrolled in Medicare.
Some universities now require their faculty to enroll in Medicare Part A when you become eligible. You’ll want to check with your benefits office in order to see if this is the case.
I’m retiring after age 65 and losing my health insurance. Now what?
If you remain under employer health coverage until retirement at age 65 or older you have eight months to sign up for Medicare without penalty. This is called the “Special Enrollment Period” and during this period you can sign up for Medicare without paying a penalty. Having COBRA coverage does not affect this deadline.
What About my Drug Coverage?
The time frame for signing up for a prescription drug plan is even shorter. Once you retire you only have two months to sign up for either a Medicare Prescription Drug Plan or a Medicare Advantage Plan. Missing the deadline will result in penalties and delays to your coverage. Having COBRA coverage does not affect this deadline.
Are the Income-Related Medicare Adjustment Amounts (IRMAA) Permanent?
If you’re still working at age 65, there’s a good chance you’re paying more than the standard rates for Part B and Part D coverage. The additional IRMAA payments you must make are based on your income from two years ago. If there’s a change in your circumstances, such as retirement, you can file a form SSA-44 showing the most recent year’s income and your expected income the following year. By filing this form when your income goes down, you should be able to lower your premiums for these plans.
While Medicare Part A does offer hospice or end-of-life care there is no coverage under Medicare for long-term care. This is an area in which we have much experience. We’re happy to have this discussion with you.
Remember, it’s always best to contact Medicare, your university benefits office and your financial adviser directly with any questions you may have in regards to your coverage options.
- To learn more about trends in university benefits plans, read this report: 4 Dangerous Trends Affecting University Retirement Plans
- To learn more about the benefits you will lose in retirement, read this report: The 4 Employee Benefits You Must Replace When You Retire
Have a Question?
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