What To Do With Medicare If You Work After 65
Many of my financial planning clients are introduced to me as they approach age 65 and have questions related to Medicare, specifically: “What do I do with Medicare if I plan on working past age 65?” In this post, I will go over a few of the more common scenarios that I encounter while working with clients that plan to continue working past age 65, and answer a few of the questions that I tend to field on a regular basis. If you have an individual health insurance policy that is not through an employer, chances are you will not be able to keep that policy when you become eligible for Medicare. This article is for those that have coverage through an employer and have additional decisions that need to be made.
The first step in the decision making process is to understand the insurance that you currently have: What does it cost each month? What are the copay and deductible amounts, and what is your maximum out of pocket exposure?
After reviewing your current coverage, you should speak with your human resources department or benefits coordinator and learn how becoming eligible for Medicare will effect your employer coverage. If you work for a company with less than 20 full time employees, their health plan may have a rule that forces you go onto Medicare and/or reduce your premium if you go onto Medicare.
Now comes the hard part: trying to understand the different parts of Medicare, their costs and coverage, and which ones you need.
Part A: Medicare Part A provides coverage when you are admitted to the hospital for anything other than overnight observation, admitted to a skilled nursing facility, receiving hospice care, and in some cases home health care. Since there is no premium cost for Part A if you or your spouse has worked and paid Medicare taxes for 40 quarters (10 years), I almost universally recommend that my clients enroll in Medicare Part A at age 65, because it adds a secondary hospitalization payer at no cost. The exception to this is if you wish to continue contributing to a health savings account, which you cannot do if you are enrolled in any part of Medicare. If you are currently drawing Social Security benefits you will automatically be enrolled in Part A at age 65. If you have not started drawing Social Security benefits yet and wish to enroll into Part A, you will not be automatically enrolled and will need to submit an application for benefits to Social Security, either in person at your local SSA office, online, or working with an advisor like myself that offers this service.
Part B: Medicare Part B covers outpatient medical, such as as doctor visits, x-rays, and lab services, as well as outpatient surgery, chemotherapy and radiation. Unlike Part A, which does not have a premium for most people, there is a monthly premium for Part B, which is $134 in 2017. If your income is over certain thresholds you may also pay what is called an income related monthly Medicare adjustment in addition to the standard premium. Like Part A, if you are currently drawing Social Security benefits then you will be automatically enrolled in Part B at age 65 and receive your Medicare card around 3 months prior. If you decide to keep coverage through your employer and delay Part B until retirement, you may do so by signing the back of your Medicare card in the declination section and you will receive a new Medicare card with Part A only. This is a very common method for those working past age 65. Also, like Part A, if you are not yet drawing Social Security benefits you will not be enrolled into Medicare Part B.
Medicare Supplement Insurance: Also called “Medigap” insurance, are polices provided by insurance companies that pay as a secondary payer to Medicare and help with out of pocket costs such as the hospital deductible and outpatient co-insurance. I almost always advise my clients to purchase a Medicare supplement policy if they don’t have secondary insurance from another source. Federal regulations have standardized Medicare Supplement plans in an effort to make comparison shopping between different companies simpler. When comparing different Medicare supplement insurance companies, it is important to review both their current premiums and if the company has an established history of offering their products in your area, and if so, what their rate increases have been.
Medicare Part C: Part C has been around since 2006 as a result of the 2003 Medicare Modernization Act. Better known as Medicare Advantage, these plans are offered by private insurance companies that have contracted with the Center for Medicare services. Medicare Advantage plans are not a supplemental plan that pay in addition to original Medicare. Medicare advantage plans actually take the place of your original Medicare. While many Medicare Advantage plans may give you an opportunity to lower your monthly premium cost, they may also require you to see doctors in their network, and have higher out of pocket costs if your health were to decline. I always advise my clients to carefully review their options and speak with their healthcare providers before enrolling in a Medicare Advantage plan.
Medicare Part D: Medicare Part D is prescription drug coverage for Medicare beneficiaries offered by private insurance companies. Each plan has a tiered formulary that determines which medications are covered and what the copay is for each covered medication. Monthly premiums vary from company to company, and some plans may have a deductible. Medicare.Gov has a very handy plan finder tool that I use to assist clients that allows you to enter your medications and compare the various plans that are available in your area.
You can find pricing information for Medicare supplement plans, as well as Part C & D plans online, through a local insurance agent that specializes in Medicare products, or contacting your local area agency on aging to compare with your current coverage and make a decision.
If you would like a guide to help you navigate the Medicare process, please complete this contact form or call my office. I have helped hundreds of people through this process and can simplify this transition for you.