The Medicare Conundrum:When Do I Enroll in Medicare?One of the most important, if not the most important, aspect of retirement is health insurance and its reliance on Medicare. But few retirees really understand the benefits of Medicare, do not know how it is financed and confuse it with Medicaid (a means test program providing health care for low income individuals and families).
The following series of questions and answers is intended to clear up some of these issues.
What is Medicare?
Medicare is the Federal health insurance program covering (1) those who are age 65 or older and are retired, (2) those who are still working beyond age 65 who are not covered by an employer-provided group health insurance plan and (3) those who are under age 65 and are receiving Social Security disability benefits. It has three main components that affect educators who are retired under the Teachers’ Pension and Annuity Fund (TPAF) or the Public Employees Retirement System (PERS): Part A, Part B and Part D.What does Medicare cover?
Part A of Medicare provides inpatient care in hospitals and skilled nursing facilities for those completely covered by Medicare. (Skilled nursing facilities provide care after a 3 day hospital stay; they do not provide custodial or long-term care.) It also covers hospice care and some home health care. For retirees, Part A becomes their primary insurance coverage and the card showing Part A coverage is used when seeking hospital services. In 2013, Part A provides 60 days of a hospital stay after a deductible of $1,184. After the deductible, there are no further charges during the first 60 days. From the 90th day to the 120th day, there is a co-payment of $296 per day of a prolonged hospital stay. If the stay lasts longer than 90 days, there is a co-payment of $592 per day for another 90 days.
Part B of Medicare covers doctors’ services and outpatient hospital care. It also covers some additional medical services that are not covered by Part A, such as physical and occupational therapy and services and supplies that are medically necessary. Part B has an initial deductible of $147 for 2013. After the deductible, Medicare pays 80% of all Part B expenses. The remaining co-insurance of 20% is the responsibility of the retiree.(Retired educators who have continued coverage through the School Employees Health Benefit Plan (SEHBP) because they retired after 25 years of pension credit or retired from a district that was part of the SEHBP... OR retired with fewer than 25 years from a district that was NOT part of the SEHBP and continued coverage in their last employer’s plan.... will have the deductibles and co-insurances of Parts A and B paid by either the SEHBP or the last employer’s insurance).
Part D of Medicare covers prescription drugs. Its benefits are determined by whether a retiree is covered by the SEHBP or a private plan.
What is the cost of Medicare?
There is no cost to the retiree for Medicare Part A. The premium payment for Medicare Part A has been paid during the working lifetime of the individual through the withholding of a Medicare deduction (1.45% of salary) from each worker’s check. (A spouse is treated as if s/he had contributed.)
Medicare Part B has a cost that is determined by the income in the household. The basic cost for everyone covered by Part B in 2013 is $104.90 per month per individual covered. But the cost of Part B is higher if the 2011 modified gross income reported to the IRS was greater than $85,000 for an individual filer or $170,000 for joint filers. There are four additional levels of income, with the greatest cost reaching $335.70 per month.
When must I enroll in Medicare?
If you are a RETIREE or someone working beyond age 65 without employer-provided health insurance, you must enroll when you reach age 65. The federal rules state that anyone who is not covered by an employer paid group insurance program must sign up for Medicare sometime during a seven month period that begins three months before the month in which the retiree reaches age 65 and ends three months after the month in which the retiree reaches age 65. If an eligible retiree fails to enroll in Medicare during this period, the retiree must wait until the general enrollment period that occurs each year (January 1 through March 31). Failing to enroll during the initial seven month period will create health insurance problems and result in lifetime higher premiums being charged for Medicare Part B.
(Note: Because of changes in the age when an individual is entitled to receive full Social Security benefits, which is gradually rising from 65 to 67, there is some confusion about the age at which Medicare enrollment must take place. The two situations are entirely different. The initial age for enrollment in Medicare is fixed at age 65. It is not tied to the age at which full Social Security benefits will be paid.)
Under a special provision of the Medicare law, employees who continue to work beyond age 65 AND are covered by an employer-paid group health insurance plan do not have to enroll in Medicare until they separate from service (and no longer have employer-paid health insurance). Under this special enrollment period, these employees have an eight month period following the discontinuance of their employer-paid group insurance in which to enroll in Medicare.
[Note: Health benefits provided after retirement through either the School Employees Health Benefits Plan (SEHBP) or an employee’s former board of education are NOT employer-paid benefits. In the case of a retiree receiving free health benefits through the SHBP - either through the completion of 25 years of credit or a disability retirement - these benefits are considered part of the retirement package and are not related to an employer-employee relationship. In any other case, the retiree would be paying for the benefits and, therefore, would certainly not be employer-paid.]
To complicate matters, each person reaching age 65, regardless of retired or working status, receives a Medicare Part A card from Social Security, which administers Medicare. For those still covered by an employer paid plan, this card is not used when seeking hospital services; instead the employer provided plan’s insurance card is used. When these employees eventually retire, whey begin using the Medicare Part A card for hospital services.
Those folks who are already retired at age 65 MUST apply for Medicare Part B coverage. This should be done 90 days before their 65th birthdays. In order to apply, individuals must contact Social Security and explain that they are applying for both Part A and Part B of Medicare. (In those cases where retirees are receiving Social Security benefits, Medicare will notify them approximately 90 days before their birthdays and will explain the need to apply for Part B.) Failure to enroll in both parts of Medicare when eligible will result in the retiree having virtually no health insurance, since the SEHBP will not provide any benefits without Medicare first paying its share.
Eventually, everyone receives a card showing Part A and Part B coverages, which becomes the individual’s primary health insurance and is used when seeking all health services, whether hospital or doctor services.
Both Part A and Part B of Medicare have deductible and co-insurance charges that are the responsibility of the patient. These costs are usually covered by individuals through a supplemental insurance policy, commonly referred to as Medigap insurance.
(Note: Retirees covered by the State Health Benefits Plan do not need to purchase a Medigap policy. The State Plan covers the deductibles and the co-insurance costs of Medicare, eliminating the need for private Medigap insurance. In the same vein, retirees covered by their former board of education plans also have coverage for the deductibles and co-insurance costs of Medicare and do not need to purchase Medigap insurance.)