5 Reasons You Should Learn the Basics of Medicare
Navigating through Medicare can be overwhelming, intimidating, and dreadful for many beneficiaries. When you’ve had employer coverage or ACA coverage for so many years, you get used to how it works, and therefore, transitioning to Medicare can be quite a change. There are several parts and plans when it comes to Medicare coverage. You may not be sure which ones you need to enroll in and which ones are optional. Medicare can also coordinate with employer coverage and retiree coverage, so it is important to know how they can coordinate as your primary and secondary coverage.
The basics of Medicare can include understanding the original parts of Medicare, when to apply, when you become eligible, how Medicare works with other coverage, and your options. Keep reading for five reasons you should learn these Medicare basics.
Understanding When to Apply for Medicare
You may be automatically enrolled in Medicare if you receive Social Security benefits for at least four months before your 65th birthday month. If you are not automatically enrolled in Medicare, you will have to apply for Medicare Part A and Part B yourself. You have a specific timeframe to do this before you receive a penalty. Once you have a penalty, you can only apply for Medicare during a particular time of the year.
However, if you have creditable coverage from a large employer, you can delay Medicare with no penalty. Understanding enrollment periods can help you determine if you will be enrolled automatically, and it will help you prepare for the future.
Knowing Medicare Costs
A common misconception about Medicare is that Medicare is free. This is far from true. When you work in the U.S., you pay Medicare taxes that are deducted from your paycheck. Those taxes fund your Part A premium, so many people have a premium-free Part A once they are eligible for Medicare. However, there are still deductibles and co-insurance associated with Part A.
Additionally, everyone must pay for Part B unless you qualify for Medicaid. Part B also has a deductible and co-insurance that a beneficiary must pay. It is essential to learn about these costs ahead of time to know what you can expect to pay in retirement.
Avoid Late Enrollment Penalties
If you know about the late enrollment penalties, you can save yourself hundreds of dollars per year. There can be late enrollment penalties associated with Part A, Part B, and Part D. Although the initial amount may not seem like a large penalty, the longer you go without creditable coverage, the more your penalty increases. If you miss your enrollment period and do not know if your coverage is considered creditable for Medicare, then you can accrue these late enrollment penalties and not even know it.
There can also be an IRS penalty if you continue to contribute to an HSA while enrolled in Medicare. Not many people know that they need to stop contributions a certain amount of time before applying for Medicare, which can cause an IRS penalty.
Employer Coverage and Medicare
It is important to know how your employer coverage will coordinate with Medicare as the number of employees makes a difference. If you are 65 and you or your spouse are actively working for an employer with 20 or more employees, you can delay Medicare with no penalty. However, if you choose to enroll in Part A or both Part A and Part B, your Medicare coverage will be secondary to large employer insurance.
However, if there are fewer than 20 employees, then Medicare will be primary, which means you must enroll in Part A and Part B when you are first eligible for Medicare.
Also, if you qualify for Medicare before 65 due to SSDI, the number of employees changes to 100.
Be Aware of Annual Changes
Many people think they can change their plan any time during the year and change to any plan they want. However, that is not true. You can change your Medicare Advantage plan to another Advantage plan during specific election period windows. The same rules apply to a Part D plan. You cannot pick up one of these plans when it is convenient.
If you are outside of your 6-month Medigap Open Enrollment Period window and want to enroll in a Medigap plan, you will need to answer health questions to apply. You can apply for a Medigap plan anytime, but your approval is not guaranteed when answering health questions. However, some states have exceptions.
Many people make the mistake of choosing a plan that works best for them now but do not realize you may not be able to change to a different plan in the future that is more cost-effective. It is essential to learn the difference between the two options and when you can make changes, so you do not make mistakes.
Educating yourself on the Medicare basics can be one of the most important things you do when entering retirement. There are many things to know and understand about Medicare, and taking the time to learn these could help you avoid making devastating mistakes.