Last Week’s Question of the Week: What is the average monthly Social Security benefit in the United States in 2018? ANSWER: Average current benefit in the U.S. is around $1404 per month.
HOST: I know you have a big topic for us today which is helping us understand more about Medicare and Medicare Supplements!
KLAAS FINANCIAL: Yes, so first disclaimer, although we are insurance licensed we do not work directly in this space, but we interact with our clients and professionals who do every day. This information today is just a primer.
First of all, let’s start with a simple question for everyone. At what age does a person today qualify for Medicare Coverage? Age 65 is the first time that an American can move on to the “National Health Care Plan” known as Medicare.
What is the difference between Medicare and Medicaid? Medicare is a medical insurance program for people 65 and older, and younger disabled people and dialysis patients. Medicaid is an assistance program for low-income patients’ medical expenses.
Understanding Medicare:
- Medicare is divided into parts. Part A, which pays for hospital services. This part is free if either you or your spouse paid Medicare payroll taxes for at least ten years. (People who aren’t eligible for free Part A can pay a monthly premium of several hundred dollars.)
- Part B covers doctor visits and outpatient services, and it comes with a monthly price tag — for most people in 2017, that monthly cost is about $109. New enrollees pay $134 per month.
- Part D, which covers prescription drug costs, also has a monthly charge that varies depending on which plan you choose; the average Part D premium is $34 a month. In addition to premium costs, you’ll also be subject to co-payments, deductibles and other out-of-pocket costs.
How and When to sign up for Medicare?
The website for U.S. Government Health and Human Services (www.hhs.gov) advises people to file for Medicare benefits 3 months before age 65.
Remember, Medicare benefits can begin no earlier than age 65. If you are already receiving Social Security, you will automatically be enrolled in Medicare Parts A and B without an additional application. However, because you must pay a premium for Part B coverage, you have the option of turning it down. You will receive a Medicare card about two months before age 65.
HOST: What about all the costs that Medicare does not cover?
KLAAS FINANCIAL: Yes, this is where a “medigap supplemental insurance plan comes into play, otherwise known as a “MED SUP.” These plans are offered by private insurance companies to help cover deductibles, co-payments and other gaps.
FACTS:
- You can switch medigap plans at any time, but you could be charged more or denied coverage based on your health if you choose or change plans more than six months after you first signed up for Part B.
- Medigap policies are identified by letters A through N. Each policy that goes by the same letter must offer the same basic benefits, and usually the only difference between same-letter policies is the cost. But you have to understand that service on claims could be different by various companies.
- Plan F is the most popular policy because of its comprehensive coverage. A 65-year-old man could pay from $1,067 to $6,772 in 2017 for Plan F depending on the insurer, according to Weiss Ratings. Weiss ratings became the first insurance rating organization to issue independent financial strength ratings for life and health insurance companies.
- On a side note: Please speak to a health insurance medicare sup provider to find what will best work in your situation.
- You can go an alternative route by signing up for Medicare Advantage, which provides medical and prescription drug coverage through private insurance companies. Also called Part C, Medicare Advantage has a monthly cost, in addition to the Part B premium, that varies depending on which plan you choose. With Medicare Advantage, you don’t need to sign up for Part D or buy a medigap policy.
- Like traditional Medicare, you’ll also be subject to co-payments, deductibles and other out-of-pocket costs, although the total costs tend to be lower than for traditional Medicare. In many cases, Advantage policies charge lower premiums but have higher cost-sharing. Your choice of providers may be more limited with Medicare Advantage than with traditional Medicare.
HOST: What if I am still working at age 65? Do I have to go on Medicare?
KLAAS FINANCIAL: Great question. Whether you need to enroll in Medicare at 65 if you continue to work and have health insurance through your job depends on how large the employer is. The same rules apply if your health insurance comes from your spouse’s job.
If the employer has 20 or more employees:
For as long as you have health insurance from an employer for which you or your spouse actively works after you turn 65, you have the right to delay enrolling in Medicare until the employment or the coverage stops (whichever happens first). At that point, you’re entitled to a special enrollment period of up to eight months to sign up for Medicare without incurring any late penalties.
Note that active employment (your own or your spouse’s) is the key phrase here. You can’t delay Medicare enrollment without penalty if your employer-sponsored coverage comes from retiree benefits or COBRA — which by definition do not count as active employment.
It is entirely your choice (not the employer’s) whether to:
- accept the employer health plan and delay Medicare enrollment; or
- decline the employer coverage and rely wholly on Medicare; or
- have both the employer coverage and Medicare’s at the same time.
However, if you enroll in both the employer plan and Medicare Part B, be aware of the consequences. In that situation, the employer plan is always primary — meaning that it settles medical bills first and Medicare only pays for services that it covers but the employer plan doesn’t. So, unless the employer coverage is very poor, you’d be paying monthly premiums for Medicare with little or no return.
Also, by signing up for Part B while you still have current employer coverage, you could be forfeiting your right to buy Medicare supplemental insurance (known as Medigap) with full federal protections after this employment ends. Those protections prohibit insurance companies from refusing to sell you a Medigap policy or charge higher premiums based on your health or preexisting medical conditions — providing that you buy a policy within six months of enrolling in Part B. (Outside of that six-month window, except in very limited circumstances, they can do both.)
If the employer has fewer than 20 employees:
The laws that prohibit large insurers from requiring (or even persuading) Medicare-eligible employees to drop the employer plan and sign up for Medicare do not apply to companies and organizations that employ fewer than 20 people. In this situation, the employer decides.
If the employer does require you to enroll in Medicare, then Medicare automatically becomes primary and the employer plan provides secondary coverage. In other words, Medicare settles your medical bills first, and the employer plan only covers services that it covers but Medicare doesn’t. Therefore, if you fail to sign up for Medicare when required, you will essentially be left with no coverage.
Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.
