Over 10,000 people in the U.S. turn 65 every day and become eligible for Medicare. The general rule is that you are required to enroll in Medicare when you reach 65, unless you have qualifying coverage elsewhere. Health plans through the exchanges (whether federal or state) don’t count as qualifying coverage, explains CNBC’s recent article entitled “Here’s how to avoid costly mistakes when switching to Medicare from a health plan through the public marketplace.”
“You need to be prepared to make that change when you are first eligible,” said Karen Pollitz, a senior fellow with the Kaiser Family Foundation. “Otherwise, you can face [costs] for being late to enroll in Medicare and for being late getting out of the marketplace.”
Of the 12 million or so individuals who have health insurance coverage through the marketplace, about 3.4 million are ages 55 to 64. Thus, some of them are nearing Medicare eligibility and will need to enroll. If you were getting a subsidy on the marketplace plan, the federal government can bill you for all the subsidy dollars you’ve received since turning 65 and not leaving that plan. Those who are already getting Social Security payments (they started those benefits before their full retirement age as defined by the government) generally will be automatically enrolled in Medicare but will still need to stop their coverage through the marketplace.
The initial Medicare enrollment period begins three months before the month of your 65th birthday and ends three months after it. Most people don’t pay a premium for Part A (hospital coverage), but there is a cost for Part B (outpatient care). For 2021, that standard amount is $148.50 monthly, although higher earners pay more.
There’s also Part D, which provides prescription drug coverage and has an extra monthly charge for beneficiaries with higher income.
Some people stay with Traditional Medicare and combine it with a Prescription Drug (Part D) plan and, perhaps, a Medicare supplement plan (“Medigap”). With Traditional Medicare, many services have a 20% copay, which is covered by the optional Medicare Supplement plan. Other people choose a Medicare Advantage Plan (Part C), which includes Parts A and B benefits, and typically Part D, as well as some extras like some dental and vision benefits. Medicare Advantage Plans could have lower premiums than Traditional Medicare, but also have more restrictions like pre-authorization, in-network benefits, and geographic boundaries.
There are late enrollment penalties for some aspects of Medicare. For Part B, if you don’t sign up on time, you could face a penalty that amounts to a 10% higher monthly base Part B premium for each 12-month period you should have been enrolled but weren’t. What’s more, those penalties generally are life-lasting. You can face costs for being late to enroll in Medicare and for being late getting out of the marketplace.
While Part D is optional, there’s a penalty if you want coverage after not signing up when you were first eligible. The fee is 1% of the monthly national base premium ($33.06 in 2021) for each full month that you should have had coverage but didn’t. This amount also generally lasts as long as you have drug coverage.
Once eligible and enrolled in Medicare, recipients have the opportunity once a year, during open enrollment, to switch plans. It is wise to evaluate your Prescription Drug Coverage and/or Advantage Plan coverage as they can change drastically from year to year. Many people have found out too late that their preferred physician in no longer in-network, or an expensive prescription is no longer on the formulary.
Healthcare expenses can dominate retirement spending so it’s vital that beneficiaries choose the right plans. Non-profit agencies such as The Senior Source, Metrocrest Services, and The Wellness Center of Collin County offer free benefits counseling.
Contact our office to find out how health care costs fit in with elder law and estate planning.
Reference: CNBC (Aug. 30, 2021) “Here’s how to avoid costly mistakes when switching to Medicare from a health plan through the public marketplace”