Preparing for Long-Term Care Expenses in Retirement presented by Blake May, J.D., CFP®. The webinar will be held on May 11th at 3:00 PM Central Time. There is no cost to attend, but you must register in advance.
Medicare enrollment and eligibility can be tricky topics to fully understand. To further complicate matters, many Americans experienced periods of unemployment over the past year due to the pandemic.
During retirement, any additional expenses can adversely impact your quality of life. That’s why knowing your situation, how to enroll in Medicare, and understanding the details around Medicare eligibility are critical to maintaining adequate coverage and avoiding penalties.
Transitions to Medicare and When to Enroll
Those at or over 65 can be classified into a few different groups when transitioning to Medicare. That’s because the time when you are required to enroll in Medicare depends on your specific employment situation. Let’s review each situation in detail:
Already Retired Person Reaches Age 65
The first situation is when someone who has already retired reaches the age of 65. If the retiree is already receiving Social Security, they are automatically enrolled in Part A and B of Medicare. If not, they must enroll in Part A and B during the 7-month initial enrollment period to avoid penalties. The initial enrollment period begins 3 months before the month an individual turns 65, includes the month they turn 65 and the 3 following months.
It is important to remember that Medicare becomes the primary payer to other retiree plans, individual insurance plans, and COBRA plans. In addition, late enrollment penalties for Medicare Part D can be assessed when eligible individuals don’t maintain credible prescription drug coverage without a continuous lapse of 63 or more days. If assessed, these penalties are paid for as long as you maintain Medicare Drug Coverage, and they often sneak up on individuals who are more focused on Part A & B deadlines.
Working Person Reaches Age 65
A second type of transition is those individuals who are working at the age of 65 and plan to continue to work for some time. Medicare is not mandatory until retirement, but after leaving employment there are deadlines that must be met to avoid penalties.
Upon retirement, these individuals have an eight-month grace period to enroll in Medicare Part A & B before penalties start building up for those programs. However, those seeking Medicare Part D Prescription Coverage should be aware that any lapse in credible prescription drug coverage of 63 or more consecutive days can result in late enrollment penalties. So many people will need to enroll in Medicare coverage before the 63 day lapse to avoid Part D penalties.
Unemployed Person 65 or Older Who Intends to Return to Work
The last transition we will discuss is those who are unemployed but have reached age 65. Unfortunately for those over 65 who lost their job, Medicare is still mandatory. If you lost your job and plan on returning to work, you can continue to defer Medicare health coverage for a period of 8 months before late enrollment penalties are assessed. But again, if you do not maintain prescription coverage, it’s important to enroll in Medicare, including Part D before a 63 day lapse in coverage has occurred.
Even those on COBRA plans will need to enroll in Medicare as COBRA plans pay secondary to Medicare Part B. So be very careful with COBRA and Medicare timelines. COBRA lasts up to 18 months, but Medicare enrollment deadlines come much sooner as described previously. Therefore, those over 65 on COBRA only have a short window to act before the various late enrollment penalties start to apply.
The Medicare Enrollment Process and How to Enroll
Those who plan on enrolling in Medicare should prioritize enrollment of the two mandatory plans, Part A and B. After enrolling in those two, then you can add-on additional coverage by selecting a Medicare Advantage Plan that includes supplemental health and prescription coverage or a Medigap Plan combined with Part D prescription coverage.
Enrolling in Medicare Part A & B
Retirees that are already receiving Social Security have it easy, as they are automatically enrolled in Medicare Part A and B. Those not yet receiving Social Security who are retired and over 65, will need to personally enroll in Medicare Part A and B up to three months before your birth month. Coverage begins on the first day of your birth month and Medicare becomes the primary payer over most other health insurance plans. Eligible individuals can enroll online or via telephone.
There is no mandate for those still working to enroll in any part of Medicare until retirement. However, Medicare Part A hospital insurance can be very attractive for some and it is often premium free. However, it’s important to keep in mind that you cannot continue to contribute to a Health Savings Account once you have enrolled in Medicare Part A or B.
Enrolling in Medicare Prescription Drug Coverage
As mentioned earlier, those eligible for Medicare and seeking Medicare Part D coverage should enroll before their credible prescription coverage has lapsed for 63 days. After that point late enrollment penalties could begin to accrue.
To enroll in one of these programs, you should first choose the Medicare Drug Plan this is right for you. You can compare plans and enroll using the Medicare website or you can complete a paper enrollment form. You can also get help by calling 1-800-MEDICARE.
Enrolling in Medigap Coverage or Medicare Advantage
If you would want additional coverage, you can select and enroll in a Medicare Advantage or a Medigap plan once you have enrolled in Part A and Part B. Medicare Advantage typically includes Part D prescription drug coverage, but those who select Medigap will need to apply for Part D separately. Most importantly, those who apply for Medigap within 8 months of enrolling in Medicare Part B are guaranteed issue of the policy without additional underwriting. After 8 months, these plans may not be issued for all individuals.
If you’re looking to enroll in Medigap coverage, you can start at the Medicare website. There you will find a 4-step process designed to help you select and enroll in a Medigap insurance plan. If you are interested in Medicare Advantage, use the Medicare Plan Finder to evaluate your options.
Returning to Work after Enrolling in Medicare
If you were out of work over the age of 65 and had to enroll in Medicare but want to go back into the workforce, you are given the decision to return to employer sponsored health plans. This analysis is very similar to those reaching 65 while working, but with a few key factors to keep in mind.
If you already enrolled in Medicare Part A with zero premiums, you cannot disenroll. However, those enrolled in Medicare Part B can disenroll, but Medigap coverage is no longer underwriting-free or guaranteed for these individuals.
Contact Meld Financial to Review Your Medicare Plan
If you need help planning your retirement or understanding your Medicare options, reach out to the team a Meld Financial. At Meld, we will develop your Financial Fingerprint™, a financial plan which is quick to assemble, easy to understand and simple to modify as your circumstances change.
With your Financial Fingerprint™, you can have confidence that you are prepared to transition to Medicare when the time is right. Contact Meld Financial today to speak to a member of our team.