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MEDICARETRANSITIONSMoving to Medicare from other types of healthinsurance can be complicated, and getting thetransition wrong can lead to costly penaltieson your premiums, and coverage gaps.Part of a series of guides and podcasts fromRetirementRevised.com
ME D ICARE TRANSIT IO N SRetirementRevisedR E T IR E M E N T R E VI SED.COM- A P RIL 2 0 1 9THE TRANSITION TO MEDICARE:HOW TO GET IT RIGHTThe transition to Medicare from other types of health insurance is fraught withpitfalls that can be costly. Signing up at the right time is critical, along withunderstanding when Medicare coverage is primary. Getting this wrong can lead tocostly lifetime late enrollment penalties on Part B premiums, and lengthy gaps inyour insurance coverage.PodcastThe most expensive lateenrollment timing. For peopleThis guide also features a podcastenrollment premium penalty is fortransitioning from employerinterview with Joe Baker,Part B (outpatient services); it iscoverage at other ages, a Specialpresident of the Medicare Rightsequal to 10 percent of theEnrollment Period (SEP) isCenter. Subscribers to thestandard Part B premium for eachavailable for eight months afternewsletter can access the podcast12 months of delay — and this is aother insurance ends, andlifetime penalty. (The Part Dcoverage begins the first monthprescription drug program has aafter you enroll.IpsumAdipiscinghere.Medicare enrollment rulesMedicare requires enrollees tosign up during a seven-monthInitial Enrollment Period (IEP) thatincludes the three months before,the month of, and the threemuch less onerous lateenrollment penalty, equal to onepercent of the national basebeneficiary premium for eachmonth of delay.)months following your 65thLate enrollment creates one otherbirthday. Missing that windowvery important risk. Even after youtriggers late-enrollment penaltiesdo enroll, you may be subject tothat continue for life - andsignificant gaps in healthpossibly expensive, long waitsinsurance coverage while waitingfor coverage to start (People whofor Medicare to begin.are still employed when they turn65 can stay with employerprovided group coverage - moreon that below).PAG E 2Medicare has three enrollmentperiods. If you enroll during theIEP, coverage starts one to threemonths later, depending on theBut late enrollees must wait for aGeneral Enrollment Period(GEP) that runs from Jan. 1 toMarch 31 each year — andMedicare coverage does notbegin until July 1.Consider this hypotheticalexample to understand just howlong this delay actually can run:Let’s say you learn at age 67 thatyou should have been enrolled inMedicare at 65. You discovers thisin April of the year that you turn67. You must now wait until 50 Digital LLC - 2019
R E T IR E M E N T R E VI SED.COMME D ICARE TRANSI T IO N S - A P RIL 2 0 1 9January through March of theprimary payor, and refuse to payproblems are not limited to thefollowing year to enroll (the GEP).your claim.transition from employerAnd at that point, your coveragewill not begin until July 1st. Thatmeans you will go for more than ayear without Medicare coverage,and probably will not be able toobtain other insurance. “Inevitably,people find out that they shouldhave enrolled in Medicare wheninsurance, so let’s consider the keyWhy problems occurissues.Late enrollment has become aStill employedmore significant risk as moreThe major exception to thepeople delay retirement, stayingmandatory sign up at age 65 is foron employer insurance past agepeople who are still actively65. Another complicating factor isemployed at that age, and theirspouses. You may delayenrollment in Medicare so long asyou are actively employed, and aPremium penaltiesspouse can also remain on youremployer coverage past age 65.The key phrase here is activelyThe most expensive penalty is levied on Partemployed. People who have beenB premiums - 10 percent for each 12 monthsCOBRA sometimes assume thatof delay. And it is a lifetime penalty.laid off from work and are usingthis coverage qualifies them todecline Medicare at age 65 -- andthat is not correct.One other exception to the activeemployment exemption applies tosomething goes wrong with thethat enrollment in Social Securitypeople who work for organizationsinsurance that they thought wasand Medicare have become lesswith 20 or fewer employees. Incovering them,” Baker says. “Orsynchronized over the years. Forthose cases, Medicare becomesthey start to generate highpeople already signed up forprimary at 65, and you must enrollmedical bills and the insurer theySocial Security at age 65,at that age.thought was covering them says,enrollment in Medicare Part A“Hey, wait a second - you should(hospitalization) and Part B isbe enrolled in Medicare. Whyautomatic.Savings Accounts (HSAs) hasBut for people who have not yetcoordination of employerapplied for Social Security, signinginsurance and Medicare. HSAs canup for Medicare requires proactiveaccept contributions only fromsteps to avoid problems. Thepeople enrolled in high-aren't you enrolled in Medicare?’At that point, an insurer will arguethat Medicare should be thePAG E 3The growing popularity of Healthcreated one other twist on the 50 Digital LLC - 2019
R E T IR E M E N T R E VI SED.COMME D ICARE TRANSI T IO N S - A P RIL 2 0 1 9deductible insurance plans — andRetiree insurancepercent of charges afterMedicare does not meet thatHealth insurance that somemeeting the annual deductible.definition. Contributions to HSAretirees receive usually providesThere is no annual limit on whataccounts must stop six monthssupplemental help meeting cost-you pay out of pocket, and youprior to your Medicare effectivesharing requirements orcan buy Medigap supplementaldate in order to avoid tax penaltiesprescription drug coverage. Thisinsurance to protect against that(this is because Medicare Part Acoverage always is secondary torisk. Most enrollees in originalcoverage is retroactive for sixMedicare - some retirees make theMedicare also add a Part Dmonths for enrollees who qualifyerror of turning down Part Bprescription drug plan.during those months.)coverage in the belief that this2. Medicare Advantage is amanaged-care option thatcombines Part A and B services,Coverage gapsand often Part D prescriptiondrugs. You must use doctorsand hospitals in the plan’sLate enrollees must wait for a Generalnetwork (for non-emergencyEnrollment Period that runs eachfor specialists; out-of-pocketJanuary 1 to March 31; coverage does notcare). Referrals may be requiredcosts vary, although someAdvantage plans have low or noout of pocket costs. You still paybegin until July.your Part B premium and apremium for the plan, althoughsome have zero additionalpremiums. Advantage plansAffordable Care Actsupplemental coverage is primaryhave a yearly limit on out ofTransitioning from coverage— and ending up with no primarypocket for part A and B coveredthrough the Affordable Care Actcoverage.service; you cannot purchase orMarketplace exchanges also is acommon trip-up point. Federal lawrequires switching to Medicare atage 65. (Medicare allows peopleto apply for relief from the lateWhat am I signing up for?When you enroll in Medicare, youhave two basic choices:1. With original Medicare, you canuse Medigap plans alongsideAdvantage plans. The plansmust cover all the servicescovered under originalMedicare; some offer extraenrollment penalties. Informationsee any doctor that acceptsservices, such as dental or visionon this relief is available in thisMedicare. You pay a Part Bcoverage. Most also includeMedicare fact sheet.)premium, and generally pay 20prescription drug coverage.PAG E 4 50 Digital LLC - 2019
R E T IR E M E N T R E VI SED.COMME D ICARE TRANSI T IO N S - A P RIL 2 0 1 9RESOURCESGoogle “Medicare enrollment help” and you’ll see a smorgasbord ofgovernment websites, insurance brokers and a handful of nonprofits.I recommend sticking with non-profits or government resources foradvice, as they are not trying to sell you anything.Here are my favorites:12The Medicare Rights Center maintains a free telephoneFederally funded State Health Insurance Assistancehotline (1-800-333-4114) that provides consumer help.Programs also provide free help with Medicare. FindThe Center also publishes an excellent online guideyour local SHIP here.that can answer many Medicare questions.34Fee-based advice. If you’re willing to pay to get adviceMedicare can provide enrollment help direct over theand help with paperwork, hire an independent, fee-phone at 1-800-MEDICARE. Each year, Medicarebased counseling service such as Allsup Medicarepublishes “Medicare and You,” a useful, comprehensiveAdvisor or GOODCARE.com.handbook on the program. Download the guide freePAG E 5 50 Digital LLC - 2019
Programs also provide free help with Medicare. Find your local SHIP here. 1 2 Fee-based advice. If you’re willing to pay to get advice and help with paperwork, hire an independent, fee-based counseling service such as Allsup Medicare Advisor or GOODCARE.com. Medicare can provide enrollment help
