Several Egan Berger & Weiner (EBW) clients have asked our advisors the same question: what should we be doing to prepare for Medicare? Your Northern Virginia-based financial planning firm turned to Dave Beck, a partner with the company, to address the key questions our advisors have been receiving regarding Medicare. Dave has spent 28 years in the financial services industry, with a primary focus on insurance planning. As part of April's Financial Literacy Month, here are his answers to your questions regarding Medicare.
- You turn 64. What should an individual start preparing for when it comes to Medicare and what will they need to do over the subsequent year to ensure they receive their benefits? You should start applying for both Medicare Parts A and B 60 days prior to your 65th birthday. You can forego applying for Medicare Part B if you can maintain coverage under a group health policy and apply without penalty when that coverage ceases (under either your or your spouse’s insurance).
- How is what you owe for Medicare determined? Medicare Part A is free as it was paid for while you were working through payroll taxes. Medicare Part B premiums are based off your income from the year prior to the most recently completed year. For instance, the premiums for 2019 are based on your 2017 income. The costs for this will be deducted from your social security payment, railroad payment, or OPM payment. If you are delaying or are not receiving social security payments, you will receive a bill. The premiums start at $135.50 per person for married couples filing jointly with incomes of less than $170,000 and reach a maximum of $460.50 for the highest income bracket.
- Once the government decides what the individual owes for Medicare, is there a way they can appeal to lower the cost? Yes, you can appeal your Medicare Part B premium payment amount if the tax data being used is inaccurate, if you had a life-changing event that significantly reduced your income or if you had one of the following seven life-changing events: death of a spouse, divorce, marriage, work reduction, work stoppage, loss of income from income-producing property, and/or loss or reduction of certain kinds of pension-related income.
- What are the primary benefits of Medicare? Medicare Part A will pay for in-patient hospital charges, skilled nursing facilities, and long-term hospital care (do not confuse this with long-term care insurance because they are very different). Medicare Part B pays for services, physicians, and treatments received outside of the hospital. Finally, you have Part D coverage, which is optional, that offers prescription drug coverage.
- Say your spouse is still working and you qualify for Medicare. Would you recommend the individual go on the spouse’s insurance or use Medicare? If your spouse is working and you are covered underneath his or her health plan you will need to see if you are eligible to stay in the plan or if you must apply for Medicare, depending on the group plan you may or may not be eligible to be covered under the plan. If you are not eligible to continue under your spouse’s plan then you need to enroll in Medicare Part A 60 days prior to your 65th birthday regardless of eligibility.
If you are eligible to be covered underneath the group health policy, you will need to compare the costs and benefit of the group health plan versus that of Medicare Part B. When the coverage under the group plan is over, you must immediately apply for Medicare Part B if you are age 65 or older, or you will be imposed a lifetime penalty for late enrollment. If you delay enrolling after the coverage of an approved health care plan ends, you will be penalized by Medicare.
The story about Medicare does not end with Medicare Part A, B and possibly D. While these do provide you with
coverage,you would be well served to look at Medicare supplements and prescription drug plans to fill in the gaps that Medicare does not cover. Also, note while many people can carry their health insurance into retirement, they should still consider purchasing Medicare B, so they will have a more complete health insurance plan. In addition to Medicare Parts A and B, there is another option (though used much less) called Medicare Advantage or Medicare Part C. This topic would require much more discussion, but for a quick summary please go the following link: Medicare Advantage.