3 Common Questions Asked by Retirees about Medicare

1949 was a big year.  The first Polaroid camera sold for $89.95 and RCA perfected the broadcast of color television.

For everyone born in 1949, 2014 marks the big 65.  

Figuring out Medicare can sometimes feel like a puzzle without much direction.  Having seen the healthcare system from the lenses of a provider and a health insurance agent, I can attest to the complexity Medicare. 

Regardless of whether I am giving a group presentation to a company, a university, or sitting at the kitchen table with clients to review their Medicare health plan options, certain questions come up time and time again. Below are 3 common questions asked by individuals turning 65:

I’m turning 65 and I’m still working.  What should I do?

If you’re a U.S. Citizen or have been permanent resident for 5 years and you’ve paid your full 40 quarters into Medicare, then you’re eligible for Medicare Part A at no cost to you.  Part A covers hospital costs but comes with a deductible.   Even if you’re still working, you can sign up for Part A.   

If you continue working and stay on your employers plan, then for most people signing up for Part A is as far as you need to go until you choose to retire. Even though you are eligible for Part B, which generally covers most preventative services and 80% of your outpatient and doctor costs, signing up for Part B will cost $104.90 per month (individuals with annual income over $85,000.00 and $170,000 for couples may pay more for their Part B and Part D coverage).

For the vast majority of individuals, signing up for Part B makes little sense if you’re going to continue working and you like your employer’s health plan.

I recently sat down with a couple who had signed up for Parts A and B when they turned 65 even though were covered on their employer’s health plan. Unfortunately, they were unnecessarily paying for their Part B premiums for 12 combined years.  This amounted to over $14,000 in extra health insurance costs. 

Many 65 year olds covered under an employer plan fear a penalty for not signing up for Part B and Part D.  If you’re covered under an employer plan with “credible coverage,” then you will not incur a penalty even if you do not sign up for Part B and Part D when you’re first eligible.  To check whether your employer plan qualifies as credible coverage, please consult your human resources department.

Key takeaway: If you continue to work past age 65 and your employer has a "creditable" health plan you like, most people should not sign up for Medicare Part B.

When choosing a Medicare plan, what should I look out for?

For Medicare eligible individuals who are not covered by a creditable employer or union sponsored health plan, you will have to sign up for Medicare Parts A and B. If you’re already collecting social security prior to age 65 you will generally be automatically enrolled and receive your red white and blue Medicare card in the mail about 3 months prior to your 65th birthday.

If you’re not collecting social security or don’t receive your card in the mail you can sign up by visiting www.socialsecurity.gov, calling, or visiting your local security office. Once you have signed up for Parts A and B and have received your Medicare card with proof of coverage, there is one more major decision you will need to make: Should I purchase Supplemental (Medigap) insurance along with a Part D prescription plan or should I enroll in a Medicare Advantage plan, also known as Medicare Part C?

While there is an alphabet soup of differing Supplemental plans available, the plans I recommend for the vast majority of my clients leave them with little or no out of pocket costs for Medicare covered services and allow them to visit any doctor or hospital in the country that accepts Medicare patients.

Please note that Supplemental insurance comes with monthly premiums that can increase with age or if the company chooses to raise premiums on all existing policyholders. You cannot be singled out for a rate increase based on your health or the amount of services you use.

Supplemental plans do not cover medications and will typically have higher monthly premiums versus Advantage plans.

If you choose to purchase Supplemental insurance, you will need to purchase a stand alone part D drug plan for prescription coverage. There are over 30 different plans to choose from here in Rhode Island. When making your selection, be sure to check that your medications are covered by the plan and that your preferred pharmacy accepts your coverage. Drug formularies can differ from plan to plan, even between 2 plans offered by the same company!

My favorite tool to find the right drug plan is the www.medicare.gov Part D plan finder.  The benefit of using this tool is that it ranks all available Part D plans by cost and gives a good view as to whether prescriptions are covered by the plan. 

Medicare Advantage plans are different from Supplemental insurance in several key aspects. Most Advantage plans combine your Medicare Part A (hospital) Part B (doctor and outpatient services) and Part D (prescriptions) into an all in one plan with low or no monthly premiums. Please remember you must continue to pay your Medicare part B premium when you enroll in an Advantage plan. These plans generally limit you to a network of doctors and hospitals that are in the plans network. If you choose to go outside the network you may have much higher out of pocket costs or even no coverage at all.

When signing up for an Advantage plan, make sure that your preferred medical providers as well as your medications are included.

Key Takeaway: If you can afford the monthly premiums and like the flexibility to access any doctor or hospital in the country that accepts Medicare patients then Supplemental insurance plus a stand alone part D drug plan may be a good option. On the other hand, if you like the idea of lower premiums and don’t mind being limited to a specific network of providers then a Medicare Advantage plan may be the right choice for you. Please note some Advantage plans include additional benefits not covered by traditional Medicare like fitness memberships, vision, hearing and dental coverage.

Do I have to go on Medicare when I turn 65?

The short answer is no.  Your employer cannot force you to go on Medicare if you are working and wish to stay on your employer group plan.  However, if you’re dissatisfied with how much you’re paying each month or the quality of your medical coverage, you now have the option to consider Medicare health plans. 

Increasing healthcare costs are forcing many employers to consider higher cost sharing with employees.  Employees are now responsible for more out of pocket expenses as well as monthly premiums.  If you pay for a substantial portion of your monthly premiums, it may be beneficial to compare your Medicare options to see if you’ll be able to save more money or get better coverage. 

However, Medicare plans do not cover spouses or dependents. 

Key Takeaway: If you feel like you’re paying too much for not enough coverage at work, consider Medicare plans.

These answers are by no means a full summary of Medicare, there are exceptions for individuals with are on both Medicare and Medicaid. I do hope they will help avoid some of the common misconceptions and pitfalls that individuals fall into.