Wed, Jun 27, 2018

10 surprising facts about Medicare

More than 55 million Americans rely on Medicare for their health care coverage. But the rules are complicated, and what you don’t know can hurt you.

Courtesy Investment News By Mary Beth Franklin

More than 55 million Americans rely on Medicare for their health care coverage. Every day, another 10,000 people turn 65, making them eligible for the government-provided health insurance program. But the rules are complicated, and what you don’t know can hurt you.

1. Medicare is mandatory

Surprised? It’s true. Once you turn 65 and are collecting Social Security benefits, you must enroll in Medicare Part A, which covers hospital costs. If you don’t want to enroll in Medicare, then you must repay your Social Security benefits. Medicare A is free for most people who have worked at least 10 years to earn the minimum 40 credits required for coverage or who are married to someone who is eligible for Medicare. If you are not yet collecting Social Security, you can delay enrolling in Medicare penalty-free under certain conditions.

2. No more HSA contributions

Once you enroll in Medicare, you can no longer contribute to a health savings account (HSA), although you can continue to take tax-free distributions from your HSA to pay for medical expenses. For some older workers, it can be a tough choice between signing up for Medicare coverage or continuing to make tax-deductible contributions to an HSA. You can’t do both.

3. Procrastinators pay dearly

Your initial enrollment period (IEP) to sign up for Medicare Part B, which covers outpatient services and doctors’ fees, begins three months before your 65th birthday, includes your birthday month and extends three months beyond that. Miss that seven-month window and you will pay a delayed enrollment penalty of 10% per year for each year you were eligible but failed to enroll. Wait until 70 to enroll, for example, and that five-year delay will cost you an extra 50% of the standard Part B premium every month you are enrolled in Medicare. There is also a 1% per month delayed enrollment penalty for Medicare prescription drug plans.

4. Work longer and skip the penalties

Working longer is a valid reason to skip enrolling in Medicare at 65. If you or your spouse are covered by a group health insurance through a current employer or union, you can delay enrolling in Medicare penalty-free. You have eight months after that insurance coverage ends to sign up for Medicare during a special enrollment period (SEP). Retiree health coverage does not count as creditable coverage but can be used as a supplemental Medigap insurance plan to fill the gaps in Medicare coverage.

5. Medicare has a lot of gaps

Medicare doesn’t cover everything. If you need certain services Medicare doesn’t cover, you’ll have to pay for them yourself unless you have other insurance that covers them. Even if Medicare covers a service or item, you generally have to pay your deductible, coinsurance and copayments. That’s where Medigap coverage comes in. Some of the items and services that Medicare doesn’t cover include services typically used by older people such as long-term care, most dental care, eye exams and eyeglasses, dentures, hearing aids and routine foot care.

6. Living abroad is no excuse

Medicare coverage is only valid in the United States. That means older Americans living and working overseas face a tough decision: to enroll in Medicare and pay Part B premiums that they can’t use outside the U.S. or wait until they return stateside and pay substantial penalties for delayed enrollment. Coverage through a foreign health system does not count as creditable coverage to avoid Medicare’s late-enrollment penalties.

7. Dawdlers may have to wait a long time to enroll

In addition to paying a late-enrollment penalty for life, those who miss their initial enrollment period may have to wait a year or more to enroll in Medicare. They can sign up only during the general enrollment period, which runs from January through March each year for Medicare coverage that begins the following July 1. So, an ex-pat who returns to the States in June 2017 would have to wait until January 2018 to enroll in Medicare for coverage to begin on July 1, 2018. In the meantime, he would be responsible for all of his medical expenses.

8. Income determines Medicare premiums

Although most people who enroll in Medicare Part B in 2017 pay the standard monthly premium of $134 per month, high-income retirees pay more. Individuals with modified adjusted gross incomes (MAGI) of $85,000 or more and married couples with MAGI topping $170,000, pay monthly premiums, including surcharges, ranging from $187.50 to $428.60 per month per person. Premiums are based on the latest available tax return, so 2017 Medicare premiums reflect income reported on 2015 federal income taxes.

9. Income brackets change next year

Starting in 2018, Medicare premiums will undergo some major changes. The top three income tiers that determine Medicare premiums will be compressed so that higher premiums are triggered at lower income levels than are in effect today. Those premiums, which will be announced this fall, will be based on 2016 income tax returns.

10. High-income premiums can be appealed

If your income has declined since the last available tax return due to a life-changing event such as retirement, divorce or death of a spouse, you can appeal the high-income surcharge. Follow the instructions on the letter you receive announcing your income-related monthly adjustment amount. However, if your income spiked for other reasons, such as large investment gains or the sale of a second home, you must pay the higher premium in 2018. But don’t worry; Medicare premiums are reset each year and if your income drops, so will your future premiums.

For more information or if you still have questions, please give FirstCommunity a call or stop by our convenient office at 699-A Gallatin Street, Huntsville. We’ll be happy to discuss your particular situation and help you in any way. Call 256-532-2783 to speak to one of our friendly staff.

More detailed information about Medicare can be found at this page on our site.

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