Everyone’s transition into Medicare is unique. How your neighbor applies for Medicare may not be exactly how you should apply. There are five things to consider when applying for Medicare. If you figure out the answers to these five things, you will have a much smoother transition into Medicare.
1. Do you plan on working past 65?
Most Medicare beneficiaries apply for Medicare during their Initial Enrollment Period (IEP). If you don’t enroll in Medicare during your IEP, you risk gaining lifelong late penalties. However, if you plan to work past 65 for a large employer and keep employer insurance, you can delay all of Medicare past your IEP without penalty.
Once you finally retire and lose active employer coverage, you will have a Special Enrollment Period (SEP) to enroll in Medicare. If you enroll during your SEP, you will avoid all late penalties you might have gained from delaying Medicare. Active employer coverage means you are actively working for that employer and are enrolled in their health insurance plan.
However, you likely qualify for premium-free Part A. If so, you can go ahead and enroll in Part A only during your IEP so you can have extra in-patient coverage. If you contribute to a health savings account and wish to continue contributions, you should delay Part A as well.
2. Do you have any other coverage besides active large employer insurance?
Nearly every other kind of coverage, besides active large employer coverage, is not creditable to Medicare Part A and Part B. Therefore, if you have COBRA, VA benefits, Medicaid, or Tricare, you will need to enroll in Medicare Part A and Part B during your IEP to avoid late penalties.
Medicare pays primary to each of these types of coverage (except VA benefits where Medicare is neither primary nor secondary). So, if you were to delay Medicare, not only would you receive late penalties, but your other coverage may not pay on your behalf. For example, once you turn 65, Medicaid pays secondary to Medicare. So, if you don’t have Medicare after turning 65, Medicaid may not pay your claims until they’ve been submitted to Medicare first.
3. Are you taking Social Security benefits?
You can receive Social Security retirement benefits as early as 62. However, the longer you delay benefits (up to 70), the higher they will grow. Therefore, many seniors choose to delay their SS benefits until they are at least full retirement age (FRA), which for most people currently is around 66 to 67 years old.
If you have been receiving SS benefits for at least four months before turning 65, you will be auto-enrolled in Part A and Part B, and they will both start on the 1st of your 65th birthday month. On the other hand, if you aren’t receiving SS benefits at that time, you will need to self-enroll by applying online at the SS website.
Suppose you’re auto-enrolled and wish to delay Medicare due to having creditable coverage. In that case, there will be instructions on delaying Medicare in your Welcome to Medicare packet that is mailed to you.
4. Do you need additional coverage?
If you have Medicare Part A and Part B plus Medicaid, Tricare for Life, or another secondary coverage, you likely won’t need a Medicare plan, such as a Medigap or Medicare Advantage plan. However, if you only have Part A and Part B, you should consider enrolling in one of these types of plans so you can be better protected from catastrophic out of pocket spending.
Medigap plans pay after Medicare has approved a claim, whereas Medicare Advantage plans pay instead of Medicare. The type of plan is the most cost-effective for you will depend on your health and budget. These two types of plans also have their own designated enrollment period, so you’ll want to make sure to enroll in one or the other during the appropriate timeframe.
5. Do you need drug coverage?
Once you have decided between a Medigap or Medicare Advantage plan, the next thing you should consider is whether or not you need Part D drug coverage. You likely won’t need a Part D plan if you chose a Medicare Advantage plan, as they generally include a Part D plan. However, you would need a Part D plan if you chose the Medigap route as they don’t have drug benefits.
Applying for Medicare is a process that requires many steps and involves many considerations. And remember, your transition into Medicare will likely be different than your neighbors, so be sure to make your own choices based on your situation.
