If Medicare Isn’t Free, What Does it Cost? Do I Need to Sign-Up, or Is Enrollment Automatic at 65?

If you are 65 and enrolled in Social Security, you may be automatically enrolled in Medicare. You may be eligible for Medicare before 65 if you have certain medical issues. If you are older than 65 and not yet receiving Social Security benefits, you will need to take action to become enrolled to receive Medicare benefits. (1) If you are receiving Social Security, your Medicare premium will be deducted from your Social Security. If you are not yet receiving Social Security, you will be billed for your Medicare.

Remember, you are not eligible for full Social Security benefits until age 66 if you were born between 1943 and 1955. If you were born in or after 1960, you must be 67 to receive full Social Security benefits. (2) Applying for Social Security before your Full Retirement Age (FRA) reduces your lifetime benefits for you and perhaps for your surviving spouse. For many people, delaying Social Security benefits until age 70 is a very good idea. Therefore, think long and hard and consult with an expert prior to applying for Social Security before your Full Retirement Age. (3)

Sound confusing? Well yes, it can be. If you are not receiving a Social Security check but want to enroll in Medicare, you need to contact Social Security either on the phone, in their offices (post-COVID), or on-line to begin coverage and arrange to pay for it. (3)

Pay for it? I thought that Medicare was free. Most people receive Medicare Part-A (hospital insurance) without a premium as long as they are eligible. (4) However, this does not mean FREE hospilitization. Part-A has annual deductibles and co-pays. (5) Most people purchase a supplemental insurance plan to help pay many of the charges not paid by Medicare.

Medicare Part-B (the doctor part) comes with a premium. The premium is “income based” which means the larger your income the more you pay. If you are married and filing a joint tax return in 2021with “modified adjusted income” of less than $176,000 your Part-B premium is $148.50 per month per person. Single folks must have income less than $88,000 to qualify for the $148/month. As your income increases, the premiums go up to a maximum of $505 per month per person. (6)

The third leg of Medicare is the Part-D prescription drug plan. And NO, drugs are not free when you are on Medicare. Your prescription costs are reduced if you are enrolled in Part-D and perhaps reduced again with an appropriate Supplemental Drug plan. All of this requires a premium. (7) This premium is also income based and ranges from free (for the Medicare portion) to $77 per month.

I have heard people say, “I don’t take any medications. Why should I pay for this if I don’t need it?” Two problems with that thought process. 1) You have no idea of what the future will bring. 2) There is a lifetime penalty for not enrolling in the Prescription program when first enrolling in Medicare.

What if my income is going down in the future or maybe it was just high in one year, how do I reduce what Medicare is charging me to reflect what my income is now? You will need to contact Social Security and explain why you have experienced a loss of income. In order to document your reason, you will need to complete form SSA-44. (13)

What if I am over 65 and still enrolled in my employer’s health plan? In that situation, you may want to elect to delay enrolling in Medicare Part-B until you leave your job. Many people enroll in Part-A because it is free at 65 even if they are covered by an employer plan. However, upon leaving your employer’s plan, you must enroll in Medicare within eight months and prove you were covered by an employer’s plan to avoid paying a premium penalty for life. (8, 9)

You mentioned Supplemental Insurance. What is that for? I thought Medicare was my insurance after 65. President Truman in 1945 called for a national health program for people over the age of 65. Twenty years later, in 1965, President Johnson signed into law “original Medicare” which was designed to cover basic health care costs for people over age 65. However, many items are not covered by original Medicare and many covered items have relatively high co-pays and deductibles. (10, 11)

Private insurance plans known as Medi-Gap, Medicare Advantage, and Prescription Drug plans pay many and in-some-cases almost all of the charges not covered by Medicare. A careful comparison of various plans to determine the best fit for you is an important exercise. (15) This is not a one-and-done exercise for life. This should be done at least every few years if not annually. Premiums for these plans differ a great deal with the extent of coverage. (12)

Enrolling in Medicare and selection of the right Supplemental Insurance plan for you is one of your major financial decisions of life. Health care cost have escalated at over twice the rate of inflation during the last ten years. (14) Wollman Wealth Designs in Escondido, CA does not sell Supplemental Insurance or directly assist with your Medicare enrollment. We are able to answer basic questions and coach you on what to ask people at Social Security or refer you to salespeople who can help you research Supplemental Insurance. The discussion about when to begin Social Security benefits is a topic we often cover with clients. Please call us to discuss these topics further. The information in this blog is written to offer basic information. For more details, call us and please read the articles referenced in the footnotes.

https://www.medicare.gov/sign-up-change-plans/get-started-with-medicare?utm_medium=Search&utm_source=Gooogle&utm_campaign=New2Medicare&utm_content=pn-07282020_V8&gclid=CjwKCAiAkJKCBhAyEiwAKQBCks5KqgliQiEjmTflok3E2KAm24fT-VbJFQzDNAZQcxXQDLfAnjSsQRoCQM4QAvD_BwE
https://www.ssa.gov/benefits/retirement/planner/agereduction.html
https://www.ssa.gov/oact/quickcalc/early_late.html
https://www.medicare.gov/your-medicare-costs/pay-part-a-part-b-premiums
https://www.medicare.gov/your-medicare-costs/part-a-costs
https://www.medicare.gov/your-medicare-costs/part-b-costs

7. https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/monthly-premium-for-drug-plans

8. https://www.aarp.org/health/medicare-qa-tool/do-i-enroll-in-medicare-age-65-even-if-still-working/

9. https://www.kiplinger.com/article/retirement/t039-c001-s001-what-to-know-about-enrolling-in-medicare-part-b.html

10. https://www.medicare.gov/what-medicare-covers/whats-not-covered-by-part-a-part-b

11. https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance

12. https://www.investopedia.com/articles/personal-finance/110514/medigap-insurance-who-needs-it.asp

13. https://www.aarp.org/retirement/social-security/questions-answers/medicare-premium-irmaa.html

14. https://ycharts.com/indicators/us_health_care_inflation_rate

15. https://www.investopedia.com/articles/personal-finance/071014/medigap-vs-medicare-advantage-which-better.asp

*Investment Advisory Representative and Registered Representative of, and Securities and Investment advisory services offered through Voya Financial Advisors, Inc. (member SIPC). Neither Voya Financial Advisors nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation.

The views and opinions expressed are those of the author, and the information should not be construed as individual investment advice, or as the opinion(s) of Voya Financial Advisors.