Are you turning 65 in 2020? As of 2020, 59.9 million people receive Medicare benefits. This article will describe to you what you need to do and what your options are as you are approaching the magical age of 65.
I’m going to keep this article simple, everything I’m talking about is for the average person. If you have disabilities or any other special circumstances, you might have other options or timelines as well.
If you have questions about something that is not answered in this article, you can schedule an appointment with me directly and I’ll gladly help you.
Who is eligible for Medicare?
On the bottom of this article is the link to the Medicare eligibility & premium calculator.
How much does Medicare Cost?
You are eligible for premium-free Part A if you or your spouse worked and paid Medicare taxes for at least 10 years.
If you (or your spouse) did NOT pay Medicare taxes while you worked, and you are age 65 or older and a citizen or permanent resident of the United States, you may be able to buy Part A. This is based on your work credits.
Let me explain, for every year that you work and pay Medicare taxes, you earn 4 work credits. If you work for 10 full years you will have earned 40 work credits which makes you eligible for premium-free Medicare Part A.
It applies to a very small percentage of Medicare-eligible people. If this concerns you, you call Social Security and they will tell you how many credits you have. You should also go online to SSA.gov and create an account so that you can keep track of all your Social Security information.
While most people do not have to pay a premium for Part A, everyone must pay for Part B if they want it. This monthly premium is deducted from your Social Security, Railroad Retirement, or Civil Service Retirement check. If you do not get any of these payments, Medicare sends you a bill for your Part B premium every 3 months. The monthly premium for Part B in 2020 is $144.60 per month.
Some people have to pay more, this is based on your modified adjusted gross income (MAGI). Your MAGI is your total adjusted gross income and tax-exempt interest income. This affected persons whose income was greater than $85,000 as a single person or $170,000 as a married couple.
Let’s start with First Time Eligibles (Turning 65)
Most people become eligible for Medicare when they turn 65 years old, that’s why this article is called “Are you turning 65 in 2020”. You should be reading this article and educating yourself about Medicare and Social Security at least 6 to 12 months prior to turning 65.
If you are already receiving Social Security checks, you will be automatically enrolled in Medicare Part A & B. You will receive your Medicare card in the mail.
What if you have work coverage and you want to keep it?
First, please talk to your HR department because from experience I can tell you that most insurance plans offered by employers do not compare to Medicare coverage and price, you also want to make sure that the coverage you have is considered creditable coverage. If your plan is not considered creditable coverage, you might face fines when the time comes and you do want to use Medicare as your primary health coverage.
But let’s say you have one of those plans that just work great for you and it’s considered credible coverage. The first thing you have to do is call Social Security and tell them that you don’t want to start Medicare Part B because you have employer-based coverage that you want to keep. That way you don’t have to pay the Part B premium and doing this will create a special enrollment period for you later on when you do want to take Part B.
If you qualify for premium-free Part A, keep it active. No reason to not take something that is free. Medicare works with current employer coverage in different ways depending on the size of the employer. For people who are eligible for Medicare because they are 65 or older, Medicare pays primary if the insurance is from current work at the company with fewer then 20 employees.
So, if you have Part A and you go to the hospital, Part A will pay before your employer coverage. This might help offset any portion that you might be responsible for. Ask your HR Department before assume how your plan might work with Medicare.
Medicare paying primary means that Medicare pays first on health care claims, and your employer insurance pays second on some or all of the remaining costs. Medicare pays secondary if the insurance is from current work at a company with more than 20 employees. If you want to keep your credible coverage, please sit down and review all your options and details so that you don’t miss out on benefits that might make your healthcare coverage more affordable.
If you keep your qualifying credible coverage, you will have a Special Enrollment Period (SEP) to enroll in Medicare at any point while covered by the employer plan or up to eight months after the first month you are without that employer coverage. To avoid gaps in coverage, it is often wise to sign up in the month before employer coverage ends.
What if you have VA Benefits?
VA and Medicare do not coordinate benefits in any. But, Having coverage through both the VA health program and Medicare gives you wider coverage and more choices of where you can be treated.
Medicare coverage may be particularly important if, say, you don’t live near a VA facility or your local facility has long wait times. With Medicare, you’re not limited to being treated at VA facilities – you can visit one of the many doctors, hospitals, and facilities that accept Medicare.
VA health care is considered creditable coverage for Medicare Part D prescription drug coverage. But you should still consider enrollment into Medicare Part D plan or an MA-PD plan to give yourself more options at local pharmacies that are open 24/7. Everybody is different and these kinds of decisions need to be made on individual bases.
Remember, if you want to use Medicare to get more coverage options, you will have to start paying the Part B premium which is $144.60 in 2020. You just have to weight out the benefits to the expense, for some people it is worth it, for others it’s not.
What if you don’t do anything and you miss your IEP?
If you missed your Initial Enrollment Period (IEP) and need to enroll in Medicare, you likely will have to enroll during either a Special Enrollment Period (SEP) or the General Enrollment Period (GEP).
Special Enrollment Period
You are eligible for a SEP and you can enroll in Medicare without penalty at any time while you have job-based insurance and for eight months after you lose your job-based insurance or you (or your spouse) stop working, whichever comes first.
General Enrollment Period
The GEP takes place from January 1 through March 31 of each year. During this period you can enroll in Medicare. Enrolling during the GEP means your coverage will start on July 1. Until that time, you will not be covered by Medicare.
Enrolling in Medicare during the GEP means you will have to pay a Part B premium penalty for enrolling late. For each 12-month period, you delay enrollment in Medicare Part B, you will have to pay a 10% Part B premium penalty forever.
How do you calculate your premium penalty?
Let’s say you turned 65 in 2017, and you delayed signing up for Part B until 2019 and you did not have credible employer insurance. Your monthly premium would be 20% higher for as long as you have Medicare (2 years x 10%).
Since the Part B premium in 2020 is $144.60, your monthly premium with the penalty will be $144.60 x 0.2 + $144.60. So your penalty would be $28.92 which would make your monthly premium $144.60+$28.92= $173.52 per month.
Note: Although your Part B premium amount is based on your income and it might be higher, your penalty is calculated based on the base Part B premium. The penalty is then added to your actual premium amount.
What to do once you have Medicare Part A & B
You just got your card in the mail, now what? Well, you have to decide how you want to use your Medicare benefits. Part A will help you pay when you are admitted into a hospital, but it does not pay for everything. Part B will help you pay for your outpatient services and doctors and nurses for example. But again, Part B does not pay for everything.
What does Medicare NOT pay for?
Medicare does NOT pay for prescription drugs. If you have Part A & B, you can buy a Part D prescription drug plan from a Medicare-approved insurance company. The average cost of a Part D plan in 2020 is $32.74. You will also have to pay co-pays and deductibles.
Medicare does NOT pay for Dental Services, Dentures, Eye exams (unless it related to diabetes), Long-Term Care ( also called custodial care), Cosmetic surgery, Acupuncture, Hearing aid and exam for fitting them & routine foot care.
It is very important for you to make plans on how you will pay for these services. The most important would be Long Term Care. Most people think that health insurance will pay for Long-Term care but it does NOT. If you are healthy right now it is highly recommended that you look into Long-Term care insurance while you still can get approved.
What will your Co-Pays & Deductible be?
Let’s start with Part A: If you are admitted into a hospital and that does not mean going to the ER. It means your doctor signed the paperwork for you to be admitted as a patient of the hospital. This can be confusing because doctors might keep in the hospital for a few days for just observation. You can always ask your nurse if you are admitted or on observation. But let’s continue with that you are admitted as a patient.
Part A will pay for all your hospital-related charges, but you are responsible for a $1408 (2020) Deductible. This deductible covers you for 60 days from the day that you were admitted. It does not matter if you go back to the hospital for whatever reason, as long as you are in the 60 day period you will not have to pay this again.
Once that 60 days have passed and you go back to the hospital, you will have to pay this deductible again. In the worst-case scenario, you can pay this deductible up to 6 times per year. That’s all you have to pay for Part A.
Let’s look at Part B: Part B is the important one because this is what you will be using most of the time. Like everyone else, you have to pay your monthly premium of $144.60 per month. When you go to the ER, that is covered by Part B and not as many people assume Part A.
After you paid your monthly premium, you will be responsible for a once per year Part B deductible of $198. So, you will pay the first $198 and then Part B will start paying. The biggest problem with Part B is that it will pay the bill, but it will only pay 80% of your bill. You are responsible for 20% of all your Part B services.
If your bill is $5000, you will have to pay $1000. The scary part is that Medicare does not have a maximum out of pocket amount. So, if you get really sick and the bill is $1,000,000 you are responsible for $200,000. And don’t think that those amounts are uncommon. I can tell you from experience because my second son (he is now 7) was at All Children’s Hosptial for 3 weeks in the ICU after he was born and the bill was just over $250,000.
What most people do and you should too!
About 60 percent of people keep Part A & B and they buy a Part D prescription drug plan to help them pay for their drugs. To protect themself from the out of pocket expenses with Part A & B most people also buy a Medicare Supplement plan to cover the gaps. Here is a breakdown on how your coverage should look;
- Part A (Hospital Insurance) – $0
- Part B (Medical Insurance) – $144.60
- Part D (Prescription Drugs) – $13 – $56
- Supplement Plan (Medigap) – $100 – $200
- Vision, Dental & Hearing – $15 to $30
That is what 60% of people’s coverage looks like when they are on Medicare. Doing it this way, you will be able to go to any doctor anywhere in the United States without needing a referral first. If you are a snowbird or you just like to travel, this is the only option you should consider.
You can join a Medigap plan if you have Medicare Part A & B. You will have an Open Enrollment Period for Medigap plans that last 6 months once your Part B becomes effective. During this period you do not have to answer any health questions to join the Medigap plan. If you ever leave your Medigap plan for an Advantage plan, you will have to answer medical questions to be able to qualify for it again. They might rate you or decline you based on your answers.
What about the other 30+%?
Ther are other plans like PPO’s and special plans for people with certain disabilities or diseases but I’m keeping this article to the most used plans.
What is an Advantage HMO plan?
Let’s say you want an HMO plan because you have seen commercials on tv where it says they cost $0 per month and you get a bunch of other additional benefits like Silver Sneakers, Dental and Vision, Free over the counter supplies, free taxi to take you to the doctor and a bunch of other stuff. Well, that is all true.
When you enroll in a Medicare Part C HMO plan, you will no longer receive Medicare healthcare benefits from the government. What happens is Medicare will pay an Insurance company that is licensed and approved by Medicare to handle all your health care services. Companies like Humana, Aetna, Baycare, United Healthcare and so on, are adding all of these axillary products at no additional charge to get you to sign up with them.
How do they make money if it’s $0 per month?
You might pay $0 dollars per month for your plan but the company gets money from the government. Basically, the government is paying your premium. And, you still have to pay the Part B premium of $144.60 in 2020, that does not go away if you sign up for an Advantage plan. If you remember just one thing from the article, I want you to remember that NOTHING IS FREE! You are paying for it somehow…
In-Network & Out-of-Network
One of the main ways that HMO companies save money is by having networks. (HMO stands for Health Maintenance Organization). When you join an HMO plan, you agree to use doctors and hospitals that have a contract with that HMO. If you go to a Doctor or Hospital who is not in the HMO’s network and it’s not an emergency, you will have to pay 100% of the bill.
If your favorite doctor leaves the HMO network, you will have to find a new doctor. Every year HMO companies reevaluate their networks, some stay the same others completely dissolve. You have to be ok with this if you want an HMO.
Copays & Deductible
Most of the time you do not have to pay an office visit fee when you go and see your primary care doctor and most of your preventive care is free. Your specialist might have a $20 to $40 office visit fee. Below are some of the copayments you might experience with an HMO.
HMO’s are well known for this term, pre-authorization. What that means is, let’s say your doctor or hospital says you need 5 therapy treatments after surgery. The doctor or hospital has to send a form to your HMO to get permission to do those treatments. If you have an HMO, get used to the fact that the HMO might say “No” or “we will only pay for 3” (This is just an example of course). You then will have to file an appeal which is a process that might take some time. HMO’s have doctors that work for them and their job is to save them money.
These are just two examples but you have to understand that some people love HMO’s and others have horror stories about them. You have to evaluate how much your options are worth to you. Here is the cost breakdown for an HMO example;
- Part A – $0 (Coverage provided by HMO)
- Part B – $144.60
- HMO – $0 – $80
- Part D – (Included in HMO) + Deductible & Co-pays
- Dental, Vision, Hearing – (Included in HMO)
This does not include your HMO’s copay & deductible (if any) and it does not include your prescription drug plans cost-sharing. To learn more about Prescription drug coverage and how they work, visit our Blog page for the appropriate article.
What you should do?
You have to sit down and think about how you want your coverage to be and how much money you are willing to spend to have different options. Not everything is explained in the article but I hope it gave you a starting point where to start.
If you have questions, It is my job to help you with this and I can show you all the different plans in your area. Please click below and schedule a FREE Medicare consultation today.