Working Together: Retirement and Medicare

Posted by Richard "Dick" Cleary on Mar 16, 2020 12:12:01 PM

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After spending decades in the workforce, retirement should be a time of relaxation, travel, spending time with family and friends, and doing the things in life you enjoy. Yet, the continuous rising costs of healthcare in the United States threaten the financial security of seniors, forcing some to give up the kind of lifestyle they hoped for during retirement. Fortunately, the federal government provides health insurance to most American citizens who are at least age 65. This broad overview about Medicare, eligibility, enrollment, and coverage will give you a general idea of how things work as you approach retirement and plan for your healthcare needs.

What Is Medicare?

President Harry Truman was the first sitting U.S. president to endorse the idea of national health insurance in 1945, but the idea didn't come to fruition until July of 1965, when President Lyndon Johnson signed the Medicare program into law at the Truman Library in Independence Missouri. In fact, President Johnson enrolled President Truman as the first American to receive Medicare benefits. The original legislation provided health insurance to most American citizens over age 65 when it was implemented in July of 1966. Today, approximately 60 million elderly and disabled beneficiaries are enrolled in Medicare. Since its genesis, several changes and additions have been made to the program as to provide more and better coverage for beneficiaries. This includes prescription medication coverage, Medigap insurance, and Medicare Advantage which will be discussed later.

Who Is Eligible for Medicare?

Once you reach age 65, you are eligible for Medicare if you or your spouse has worked for 10 years, or 40 quarters, in Medicare-covered employment. This includes any job where the employer collected FICA tax, which funds Medicare and Social Security, from your earnings. You must be a citizen or permanent resident of the United States and you do not have to collect Social Security benefits to qualify for Medicare at age 65. Through the years, Medicare has been expanded to extend benefits to people of all ages who have a disability or qualifying condition. Exceptions which allow an individual to receive Medicare benefits prior to age 65 include:

- Kidney failure, more formally referred to as end stage renal disease (ESRD)

- A disability for which a person has been entitled to Social Security disability
benefits for 24 months

- A disability for which a person has been entitled to receive a disability pension
from the Railroad Retirement Board

- Those who suffer from ALS (Lou Gehrig's disease) will automatically receive
Medicare when their Social Security disability benefits begin.
Medicare Coverage Options

Original Medicare is coverage administered by the federal government. It includes Part
A, which is hospital insurance, and Part B which is medical insurance.

- Part A coverage is free for those who meet the eligibility requirements as we
stated above. Those who fall below the minimal requirements, must pay a
premium in order to obtain Part A coverage, which can be as much as $437
per month in 2019. Premiums are on a sliding scale based on how many
years/quarters an individual has worked in Medical-covered employment. Part
A covers inpatient hospital care, nursing home care, hospice care, and home
health care.

- Part B coverage is optional in most cases, and you must pay a monthly premium of $135.50 in 2019. Premiums increase as monthly income increases, and can be as much as $460.50 per month in 2019. Part B coverage includes clinical research, ambulance rides, medical equipment, inpatient and outpatient mental health services, and most doctor services while you are hospitalized.

Medicare Advantage (Part C) is coverage provided by private companies who contract
with Medicare. These plans include all benefits from Part A and part B bundled together.

Costs for Medicare Advantage plans are set by the individual provider, not by Medicare. They can change each year and vary on a variety of factors including deductible, co-pays, and whether you use network providers. Plans include:

- Health Maintenance Organizations (HMOs)

- Preferred Provider Organizations (PPOs)

- Private Fee-for-Service Plans

- Special Needs Plans

- Medicare Medical Savings Account Plans

Medicare Add-ons

Medicare also provides prescription drug coverage (Part D) for beneficiaries and Medigap coverage for medical and hospital expenses not covered under Original
Medicare.

Prescription Drug Coverage (Part D)

Those who have chosen Original Medicare must pay premiums for Part D. Medicare sets minimum standards for coverage included in prescription drug plans, but premiums and specific coverage will vary among the plans. Keep in mind that Medicare Advantage plans will typically include prescription drug coverage, so Part C beneficiaries are not eligible to buy Part D prescription drug coverage.

Medigap

This medical supplement insurance policy helps pay costs not covered by Original Medicare (Parts A and B). Some examples include co-payments, co-insurance, and
deductibles. Private companies sell Medigap coverage, but you must have both Part A
and B to purchase Medigap insurance. Monthly premiums for Medigap are over and
above your Medicare premium. Medigap coverage does not typically cover long-term
care, vision, dental, hearing aids, or private nursing services.

Medicare Enrollment Periods

When you are initially eligible for Medicare, you need to make choices about whether
you want Original Medicare or Medicare Advantage. Your initial enrollment period is
seven months, which begins three months before you turn 65. The same enrollment
period applies for Part D prescription drug coverage. The most important point to
understand is that you must enroll for Medicare Parts A and B sometime during this
seven-month period. It isn’t a requirement that you take Part B, as long as you enroll.
Failure to do so, may result in a penalty. However, if you aren't happy with your choices
you made, you are not stuck with them. You can make changes without penalty, as long
as you do during the yearly enrollment period extending from October 15th to December 7th. Any changes you make during this time will go into effect January 1st of the following year.

By the way, the Medigap enrollment period lasts for six months and begins the first day of the month you turn 65.

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