Medicare Coverage Changes After Age 65 Can Be Unsettling For Many Retirees

Many retirees can’t wait until they turn age 65 and become eligible for Medicare, the federal health insurance program for senior citizens. But many are also surprised by the complex rules of the program. There are important deadlines to make and potential fees if you miss them. Those working past age 65 face important decisions. This article covers the most important things to know about Medicare.

What Does Medicare Cover?

To start, it’s a good idea to learn some basic information about Medicare, and how it differs from Medicaid. From Medicare.gov: “Medicare is federal health insurance for anyone age 65 and older, and some people under 65 with certain disabilities or conditions. Medicaid is a joint federal and state program that provides health coverage for certain low-income people, families and children, pregnant women, the elderly, and people with disabilities.” There are about 63 million Americans on Medicare.

There are several types of Medicare:

• Medicare Part A covers hospital costs, nursing homes, hospice, and home health care
• Part B covers doctor’s visits, preventative treatments, outpatient services, medical equipment, and home health care
• Part C (also known as Medicare Advantage) is a Medicare-approved plan from a private company that offers an alternative. These bundled plans include Part A, Part B, and usually Part D.
• Part D cover prescription drugs and many vaccinations
• There’s also Medigap, which is supplemental insurance you can buy from private companies to help pay your share of costs under original Medicare

When you first enroll, you choose between original Medicare and Medicare Advantage (Part C). Currently, more than half (about 54%) of all Medicare recipients opt for Part C, which offers extra benefits not available in traditional Medicare and caps annual out-of-pocket costs. Many Medicare Advantage programs cover vision, hearing, and dental services — which aren’t covered by original Medicare.

The Coordination of Benefits

New Medicare recipients will quickly become familiar with the Coordination of Benefits (COB). This refers to the complex rules around primary and secondary insurance. In addition to Medicare, many retirees may have private insurance from previous employers, pension plans, or unions.

The COB process “ensures claims are paid correctly by identifying the health benefits available to a Medicare beneficiary, coordinating the payment process, and ensuring that the primary payer, whether Medicare or other insurance, pays first,” according to Centers for Medicare & Medicaid Services. Then any secondary insurance kicks in to cover the rest. To determine who pays first, Medicare.gov offers an interactive questionnaire. Answer a few questions and you’ll learn more about how COB will work for you. You can also call the Benefits Coordination & Recovery Center for assistance at 1-855-798-2627.

There are too many potential scenarios to list them all, but here are a few of the most common to illustrate how COB works:

• If you have retiree health coverage from your or your spouse’s former employment, Medicare is considered the primary insurance and pays first.

• If you’re 65 or older and have group health coverage based on your or your spouse’s current employment (and the employer has 20+ employees), your group health insurance pays first. If the company has fewer than 20 employees, Medicare pays first.

Why It’s Important to Meet Enrollment Deadlines

There are important deadlines to meet when filing for Medicare, and potential penalties if you miss them. The initial enrollment period lasts for seven months, starting three months before your 65th birthday, and ending three months after the month you turn 65. Most people file for Part A as soon as they reach 65. If you’ve worked for at least 10 years and paid Medicare taxes, Part A premiums are free.

If you haven’t done enough work or paid Medicare taxes, you must pay premiums for the coverage. This is usually several hundred dollars per month for most people in this category. “If you do have to pay premiums for Part A, the late enrollment penalty is 10 percent, added to that monthly premium,” according to the AARP. “You will pay Part A penalties for twice the number of years that you could have paid premiums for Part A but didn’t. For example, if you delayed enrollment for three years, you would pay penalties for six years.”

Some may delay filing for Part B if they have other health insurance and don’t want to start paying Part B premiums. If you’re still working past age 65, the late penalties may not apply. “During the Initial Enrollment Period, most people who are still actively employed past their 65th birthday — and get health insurance through their employer (or an actively working spouse) — can safely delay enrolling in Medicare Part B until the worker retires,” according to the National Council on Aging.

But if you’re retired and fail to enroll during this period, late enrollment penalties kick in. These penalties are added to your monthly premium and are not a one-time late fee. They are usually charged for as long as you have that type of coverage — meaning it’s a lifetime penalty … ouch!

If your private health insurance ends after age 65, you can then enroll in Medicare Part B through what’s called a special enrollment. “Sign up before your coverage ends or within eight months of losing the insurance to avoid a late enrollment penalty,” the AARP advises.

There are also potential late penalties for Part D. This surcharge is permanently added to the monthly premium of your prescription drug plan if you fail to sign up when you’re first eligible for Medicare and don’t have similar drug coverage. “If you don’t have creditable coverage, the best time to sign up for a Part D plan is during the seven-month initial enrollment period surrounding your 65th birthday — even if you don’t take daily medications now,” the AARP says. “Part D plans can change their costs and covered drugs annually. So it’s a good idea to compare your options during open enrollment every year, which runs Oct. 15 to Dec. 7 for new coverage starting Jan. 1.

Another thing to remember: if you already get Social Security, you’ll be signed up for Original Medicare (Parts A and B) automatically.

For more information about Medicare, the AARP offers a comprehensive guide.