Since I will be turning 65 in September, I will not be eligible to participate in my employer’s Health Savings Account effective September 1st. Therefore, I need to sign up for Medicare to provide my medical insurance coverage. It is unbelievable the amount of mail solicitations that I received regarding Medicare supplemental insurance and related drug coverage insurance plans.
Basically, Medicare has two parts of medical coverage. Generally, Part A covers the cost of inpatient care in hospitals. Part B covers doctors’ services, outpatient hospital care and home health care. If you have accumulated forty (40) quarters of earnings, Part A is provided at no cost. If you are not eligible for the premium-free Part A, you may be able to buy Part A coverage. However, Part B has a monthly cost that you must pay. The monthly premium is based on your modified gross income from 2 years ago. The following table indicates the Part B monthly premium.
Did you know that if you do not enroll in Medicare when you are first eligible, there is a late-enrollment penalty? The penalty is 10% of your monthly premium. I avoided the late-enrollment penalty by apply for Medicare Parts A and B during the recommended enrollment period, three months prior to the month I turn age 65.
Medicare covers only about 80% of the Part B expenses. In addition, Parts A and B have deductibles and co-insurance. Therefore, to limit my out-of-pocket cost, I have enrolled in a Medicare supplement insurance plan (also called Medigap insurance). The federal government has defined standard benefits for each Medicare supplement insurance plan. The following table lists the type of plan and related coverage:
Since I was only interested in purchasing Plans F and/or G, the following table presents the monthly premium quotes that I received. The spaces marked as N/A indicates that I did not request a quote for that coverage. Since I did not want to be in a Medicare Advantage Plan (like an HMO or PPO), I did not pursue monthly premium quotes for these types of plans.
In addition to Part A and B, Medicare, contracted through private insurance companies, offers Part D coverage. Part D is for prescription drug coverage. Similar to Medicare Parts A and B, if you do not join a Medicare Prescription Drug Plan when you are first eligible and you decide to join one later, you may have to pay a late enrollment penalty.
There are many exceptions and other conditions regarding Medicare and related insurance plans that cannot be discussed here due to space limitations. However, the Social Security Administration provides a very informative booklet entitled Medicare & You 2011. Also, you can visit the Medicare website, www.medicare.gov, for more the most current information.
George Woodard, CPA