How Do I Stay Clear of Mistakes when I Switch Medicare?

Orange City Iowa Estate Planning

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If you get your health insurance through the public marketplace and are nearing age 65, don’t forget about Medicare.

The general rule is that you are required to join Medicare when you reach 65, unless you have qualifying coverage elsewhere. Plans through the exchanges (whether federal or state) don’t count, explains CNBC’s recent article entitled “Here’s how to avoid costly mistakes when switching to Medicare from a health plan through the public marketplace.”

“You need to be prepared to make that change,” said Karen Pollitz, a senior fellow with the Kaiser Family Foundation. “Otherwise, you can face [costs] for being late to enroll in Medicare and for being late getting out of the marketplace.”

Of the 12 million or so individuals who have health insurance coverage through the marketplace, about 3.4 million are ages 55 to 64. Thus, some of them are nearing Medicare eligibility and will need to enroll. If you were getting a subsidy on the marketplace plan, the federal government can bill you for all the subsidy dollars you’ve received since turning 65 and not leaving that plan. Those who are already getting Social Security payments (they started those benefits before their full retirement age as defined by the government) generally will be automatically enrolled in Medicare but will still need to stop their coverage through the marketplace.

The initial Medicare enrollment period begins three months before the month of your 65th birthday and ends three months after it. Most don’t pay a premium for Part A (hospital coverage), but there is a cost for Part B (outpatient care). For 2021, that standard amount is $148.50 monthly, although higher earners pay more.

There’s also Part D, which provides prescription drug coverage and has an extra monthly charge for beneficiaries with higher income.

Some people stay with basic Medicare and combine it with a standalone Part D plan and, perhaps, a Medicare supplement plan (“Medigap”). Others choose an Advantage Plan (Part C), which includes Parts A and B benefits, and typically Part D, as well as some extras like some dental and vision benefits.

There are late enrollment penalties for some aspects of Medicare. For Part B, if you don’t sign up on time, you could face a penalty that amounts to a 10% higher monthly base Part B premium for each 12-month period you should have been enrolled but weren’t. What’s more, those penalties generally are life-lasting. You can face costs for being late to enroll in Medicare and for being late getting out of the marketplace.

While Part D is optional, there’s a penalty if you want coverage after not signing up when you were first eligible. The fee is 1% of the monthly national base premium ($33.06 in 2021) for each full month that you should have had coverage but didn’t. This amount also generally lasts as long as you have drug coverage.

Reference: CNBC (Aug. 30, 2021) “Here’s how to avoid costly mistakes when switching to Medicare from a health plan through the public marketplace”

 

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