You must enroll in Medicare at age 65, unless you are covered by a health plan from an employer or your spouse’s employer. If you don’t enroll on a timely basis, you will have to pay late enrollment penalties.
For Part A, that penalty is a 10% increase in the monthly premium, which must be paid for twice the number of years you were eligible but not enrolled. The penalty for late enrollment in Part B is 10% for each 12 month period that you were eligible but not enrolled and the penalty must be paid for the ENTIRE time you have Part B coverage.
If you are receiving Social Security benefits when you turn 65, you will automatically be enrolled in Parts A and B. Retirees who aren’t automatically enrolled can do so as early as one to three months before the month you turn 65. Part B coverage will start as soon as you hit 65. If you wait until the month you turn 65 to enroll in Part B, or the three months after your birthday, there will be a delay before Part B coverage takes effect.
ABCD’s OF MEDICARE ENROLLMENT
Part A covers hospital insurance; Part B covers medical insurance; Part C, also called a Medicare Advantage plan, combines Parts A, B and sometimes D; and Part D covers prescriptions.
Retirees can sign up for Parts A and B, and then decide if they need Part D. They may also decide if they need a supplemental “Medigap” policy since Medicare only covers a maximum of 80% of approved charges.
Alternatively, retirees can sign up for the Medicare Advantage plan. Medigap policies aren’t available to Medicare Advantage plan beneficiaries.
Retirees who want Part D coverage must sign up during their initial enrollment period or face late-enrollment penalties, unless you have comparable coverage through another plan. You can switch to Part D any time before that comparable coverage ends; after it does, retirees have 63 days to enroll in Part D. If you miss the initial enrollment period, you can sign up during the general enrollment period between January 1 and March 31, but coverage won’t begin until July 1.
The average out of pocket cost paid in 2016 was in excess of $5,000. Most people won’t pay Part A premiums if you or your spouse paid into Social Security for at least 10 years (40 quarters). If you paid into the system for between 30 and 39 quarters, the premium in 2017 is $224 a month, and increases to $411 per month for those who paid into the system for fewer than 30 quarters.
The base premium for Part B in 2017 is $134 per month. The more income you make, the higher premium you pay for Part B. For example, joint filers with a modified adjusted gross income between $170,000 and $214,000 will pay an additional $42 per month.
Part A deductibles are $1,317 in 2017 per benefit period or “spell of illness”. A patient is eligible for 90 days of hospital care and 100 days of extended care in the same benefit period.
However, coinsurance kicks in after 60 days and patients will have to pay $329 per day during the benefit period in 2017. After 90 days, when patients begin drawing on their lifetime reserve, coinsurance increases to $658 per day in 2017.
The deductible for Part B is $183 per year in 2017.
Part D coverage introduces the so called “donut hole”, the gap in coverage when costs exceed the combined annual deductible of $400 in 2017 and the initial coverage period of $3,700 in 2017. During that initial coverage period, patients are responsible for 25% of their prescription costs, but once they meet the donut hole limit, Part D benefits stop. Patients will take on 40% of the cost of covered brand name drugs and 58% of the cost of covered generics.
The maximum out of pocket cost for prescription drugs in 2017 is $4,950. Once that limit is exceeded, catastrophic coverage kicks in. Part D will pay 95% of covered drugs, or the cost of the drug minus the co-pay. Patients will be responsible for either 5% of the cost, or co-pays of $11.20 for generic drugs and $7.20 for brand name drugs, whichever is greater.
Long-term care is not covered by Medicare or Medigap.
Medicaid, however, does cover some LTC services, although programs and eligibility vary by state.