Understanding the intricacies of Medicare can be tricky, and avoiding some of the common mistakes can save you a great deal of frustration and money. If you are getting close to age 65, here are some things to think about.
Medicare Part A
It’s easy to get confused about signing up for Medicare Part A, especially if you will be delaying Social Security to receive a higher benefit. When it comes to Medicare Part A, there is no delaying. At age 65 you must enroll in Part A. There is a 7-month window to enroll. It begins 3 months before your birth month and ends 3 months after your birth month. If you miss this window you are not eligible again until open enrollment, which is from October 15th to December 7th each year. Your coverage will not begin until January 1st of the following year. Failure to enroll in Part A coverage can put you on the hook financially if you have a hospital stay.
Medicare Part B
The enrollment dates for Medicare Part B hinge on whether you are working after age 65 and are covered by an employer plan. If so, you may be able to delay enrollment until you retire. If not, and you miss the enrollment window, you could be subject to a premium penalty of up to 10% for every 12-month period beyond when you should have signed up. And if that isn’t bad enough, the penalty never goes away. Let’s say you wait 3 years to sign up for Part B coverage, your penalty could be as much as 30%. In real dollars, the 30% penalty would increase your monthly premium from $134 to $174.20 based on 2018 rates. While that may not seem like a lot of money, it’s substantial if you are retired and living on a fixed income.
Income-Related Monthly Adjustment Amount (IRMAA)
Medicare Part B premiums can also be affected by high-income years. This could result if you sell a property or business or take large distributions from retirement accounts. If you are subject to IRMAA, your premiums will increase for two years. The trigger points for IRMAA are cliff thresholds, not marginal, and there are 5 in all. For married couples, the first threshold hits at $170,000. What we mean by cliff is if your income is $170,001, you hit the threshold and your premium increases from $134 monthly to $187.50. This increase continues for two years and is per person. For those who are single the first threshold hits at $85,000.
Nursing Care Coverage
There is very little coverage under Medicare for a stay in a nursing care facility – rehabilitation and other limited situations only. Medicare does not provide coverage for help with activities of daily living, which is the type of care most often needed by elderly individuals. Plus, to qualify for coverage under Medicare, you must go directly from the hospital, as an inpatient, to a care facility.
These are just a few of the hurdles you need to know when preparing for health care in retirement. Talk to one of our knowledgeable advisors; we can help determine the best options based on your specific needs and benefits.