The closer I get to age 65, the more curious I become about Medicare. Earlier in my retirement thinking (perhaps five or ten years ago), I casually made some assumptions about Medicare – both positive and negative – that turned out to be untrue. This earlier thinking was generally along this incorrect path: Medicare is free, covers most everything an older person would need, but finding providers who would accept Medicare would be difficult. Now my thinking about Medicare is more accurate but there are still some myths out there.
Myth No. 1: Medicare covers most everything. Not even close. Medicare doesn’t cover hearing aids, dental care, vision care, or long-term care. It also won’t provide coverage for health care required while you are traveling outside of the U.S. You will need to purchase additional private insurance for these categories. Some of these are offered as “Medicare Advantage” plans.
Myth No. 2: Medicare is free. Nothing is free. Everyone will pay a premium for Medicare Part B (doctors visits and outpatient services). For 2011, that premium is $115.40 each month. High earners (170k plus for a married couple) will pay even more. High earners will also pay a premium surcharge for Medicare Part D (prescription drug coverage.)
While Medicare Part A (hospital care) is generally premium-free, there are deductibles for hospital stays, etc. In 2011, that deductible is $1132. Not chicken feed.
There is some good news: Under the new health-care law, Medicare users are entitled to annual wellness check-ups at no charge, including preventive screenings such as colonoscopies and mammograms.
Because of these costs, most Medicare beneficiaries purchase a supplemental insurance plan, known as “Medigap.”
Myth No. 3: You can sign up for Medicare anytime after you reach age 65.
The decision about Medicare sign-up is usually a factor of whether you are still receiving health insurance through “active employment.” If you are no longer receiving benefits from your employer (including Cobra or retiree health benefits), you need to sign up for Medicare immediately. If you do not , your Part B premium will be increased 10% for every 12 months you delay. There also may be a waiting period during which you will be uninsured.
If you are 65 or older, still working, and have insurance coverage from your employer, you may want to delay signing up for Medicare to avoid paying premiums for coverage you don’t need. If your employer has 20 or more workers, Medicare will usually be a “secondary payor.” In that case, you can delay enrollment without incurring a Part B premium penalty.
Where it gets confusing is there is loss of coverage from a job loss, such as when an older spouse has been receiving primary coverage from a younger spouse. If that younger spouse loses his or her job, the older spouse needs to sign up for Medicare promptly to avoid a penalty. If the younger spouse goes on Cobra, that is not considered “active employment” for the older spouse.
There is a lot more for me to learn about Medicare. I expect that more changes will be coming in the next five years as well.