When You Aren’t Retired: How Medicare Works

When You Aren't Retired How Medicare Works

Affording healthcare after retirement can place a significant burden on many people. A Commonwealth report shows that older Americans pay more for healthcare. The result is many will skip seeking treatment due to the associated costs.

One of the biggest sources of relief has been the Medicare plan. Yet, the financial protection it offers to beneficiaries is not enough. The cost-sharing aspects of the federal insurance healthcare are a major stumbling block. It leaves many older adults still liable for high healthcare costs.

What happens if you are approaching retirement but opt to continue working? You may wonder whether you are still eligible for Medicare and how to sign up. We will provide the information you need to know. But, let us explore Medicare in a bit of detail first.

Understanding Medicare

The Federal Government established Medicare as a health insurance program for:-

  • Persons falling within the ages of 65 and above
  • Young people with disabilities
  • People suffering from specific diseases like end-stage renal disease

The Medicare plan falls under the Medicaid Services (CMS) and the Centers for Medicare. Please note that being a federal program, the rollout of Medicare is the same for all states. That means the Medicare eligibility in Texas is the same as in New York, Alabama, Kentucky, or California.

You have a seven-month window to apply for Medicare once you get to the right age. This is three months before your birthday, birth month, and three months after.

Please note you can incur penalties if you miss this window. You may, for example, end up paying up to 10% more for every year you would have signed up for Part B but did not. The extra amount will go to your premiums.

But, there may be minor differences in areas like enrollment periods. Some states have limitations on when you can apply for Medigap; others don’t. For example, Connecticut and New York have an all-year-round issue guarantee. In Massachusetts, you can only apply in February and March.

For Oregon and California, you have a 30-day window following your birthday. Please talk to the Medicare experts in your area to know what is applicable.

Medicare Cover Scope

The Medicare plan covers three specific services.

Medicare Plan Part A or Hospital Insurance

Part A pays for hospital stay, hospice and skilled nursing facility care. Please note that, as of 2022, you are liable for an annual deductible of  $1,556. There is no monthly premium applicable.

Medicare PlanPart B or Medical Insurance

Part B takes care of specific doctor’s services. It also pays for medical supplies, preventive services, and outpatient care. As of 2022, the monthly premium is $170.10 for income levels up to $91,000 for single tax filers. It goes up to $182,000 for married couples. There is also the $233 you have to pay as a deductible of $233.

Medicare Plan Part C or Medicare Advantage

Medicare-approved companies offer Medicare Part C. You must have signed up for Medicare Part A and B to get the cover.

Medicare Plan Part D

Part D offers prescription drug coverage.

Medicare Options for Those Who Have Not Retired

Medicare Plan Part A

You can enroll for Medicare even if you have not retired but are approaching age 65. There are some factors that need to be considered. The first is the size of the company. You must also consider the employer health insurance coverage you are getting.

The government will automatically enroll you for Medicare Part A if you claim social security benefits.

But, what if your company has more than 20+ employees and employer health insurance? Well, you can decide not to enroll for Part A. The employer, in this case, covers most of your insurance payments. That means you can’t qualify for premium-free Medicare part A and have low deductibles.

You are better off enrolling for Medicare if the company has less than 20 employees. The same applies if you have COBRA or health insurance marketplace plans. Medicare, in this case, becomes your primary cover. It will pay for services first and the job insurance second.

Medicare Plan Part B

Now, let’s say you work in a company with more than 20 employees and have employer health insurance. You can opt out of signing for Medicare part B.

The job insurance becomes your primary cover, and Medicare pays second. You can sign up for Part B once you lose your job insurance cover or stop working. But of course, you need to meet the 65-year eligibility criteria.

Medicare Plan Part D

As we stated, Medicare Part D covers drug prescriptions. Check if the employer’s health insurance gives better drug cover than Part D.

You will find reference to this as creditable prescription drug coverage.Creditable means that the cover provides the same value as what you get with Medicare Part D. This could be former or current employers, unions, or individual health insurance.

If the employer’s cover is creditable, you can stick with that. That way, you don’t have to sign up for Medicare Part D.

If the cover is not creditable, sign up for a Medicare drug plan or Medicare advantage. Please ensure you do so within three months from when your Medicare cover starts. If you opt to sign up later, you may have to pay higher premiums.

The employer’s drug plan can switch to not creditable for whatever reason. In that case, make sure you sign up for Medicare Advantage or Medicare drug plan within two months.

Summary of Medicare for the Unretired

In summary, you don’t need to sign up for Medicare when you turn 65 as long as you are still working. It will depend on:-

  • Whether you have employer health insurance for you or your spouse
  • The number of employees in the company. This applies to you and your spouse
  • If you are self-employed or have health insurance that others in the company do not have. If you have group health coverage as per the IRS definition. These are health plans offered by the employer or employee organization. It covers the employees and their families.
  • If you have Continuation of Health Coverage (COBRA) health insurance.

We also reiterate the point of automatic enrolment into Medicare. If you don’t claim social security benefits, the government will not enroll you into Part A.

Now, what happens if you and your employer contribute to a health savings account? You should stop doing so six months before signing up for Part A. Next, apply for social security benefits. That way, you will not be liable for any tax penalties.

Final Thoughts

We have touched on salient points about Medicare if you have not retired. But, there is a lot more to know. So, talk to the Medicare agent in your area for more information.

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