How to Transition into Medicare?

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The Timing, Costs, and Factors to Know

By Lon Jefferies MBA CFP®

Lon JeffriesDid you know that the choices you make during your first year of Medicare eligibility will have long-term financial consequences? Yes, it is true!

And unfortunately, most people and even medical professionals have to make these decisions at a time when they are only beginning to familiarize themselves with a complex program.

The Rules

If you don’t follow Medicare’s enrollment rules, you may pay lifelong penalties for coverage. You have a seven-month window to enroll in Medicare as you turn 65. This window begins three months before the month of your birthday, includes the month of your birthday, and continues for the following three months.

The Parts

Part A

In most cases, you should sign up for Medicare Part A, which covers hospital stays, when you turn 65, even if you have other health insurance coverage. There is no cost for this coverage as long as you have 40 quarters of work in which you paid FICA taxes.

However, be aware that you are not allowed to contribute to a health savings account (HSA) if you are receiving benefits from Medicare. Thus, you may want to defer beginning Part A to continue building up your HSA balance to help offset future healthcare costs not covered by Medicare.

Part B

Medicare Part B covers services and supplies that are needed to diagnose or treat medical conditions, and health care to prevent illness. The standard monthly premium for Part B in 2013 is $104.90, but individuals with a modified adjusted gross income (MAGI) more than $85,000 and couples with a MAGI more than $170,000 pay more.

The premium ranges from $146.90 to $335.70 for those with incomes above the thresholds. If you have group health insurance through your own or a spouse’s employer, you may want to delay beginning Part B.

However, for this to be done without penalty, be sure to enroll in Part B coverage within eight months of the time your employment ceases. Otherwise, for every 12-month period that you could have been enrolled in Medicare Part B but were not, you will pay a 10 percent penalty on your Part B premium for life.

Part D

Medicare Part D covers prescription drugs. This coverage is usually purchased at the same time as Part B.  Part D monthly premiums vary by plan. However, higher-income beneficiaries (singles with a MAGI over $85,000 and couples with a MAGI over $170,000) pay from $11.60 to $66.60 more each month.

There is also a late enrollment penalty for Part D that is one percent of the “national base beneficiary premium” ($31.17 in 2013) multiplied by the number of full months you went without drug coverage.

Part C

Note that Medicare Part C is not a separate benefit. Part C, sometimes referred to as a Medicare Advantage Plan [MAP], is the portion of Medicare that allows private health insurance companies to provide Medicare benefits.

Part C is an alternative method for obtaining the same coverage that Part A and Part B provide, but do so through private insurance providers with different rules, costs and coverage restrictions. You can also get Part D as part of the benefits package if you choose. Although significant research is required, determining whether Part C is a viable option for you is simply a matter of considering your health, the medical services you use regularly, your prescription drug medications, and your budget.



Medicare is a complex program. Enrolling on time and making informed decisions about coverage can save you thousands of dollars each year during retirement.


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6 Responses

  1. Estimates of Healthcare Costs in Retirement

    Most individuals have not taken steps to plan for health care costs in retirement. Across age groups, only about one-third (36%) have tried to estimate how much money they will need to save and have set money aside to cover these expenses in the future. Adults age 60-64 (40%) are just slightly more likely than those age 50-59 (35%) to have money set aside although these differences are not statistically significant.

    Estimates of the actual costs of health care in retirement vary significantly. More than four in ten adults age 50-64 (42%) believe they will need to accumulate less than $100,000 to cover out-of-pocket health care expenses during their retirement. In addition, sixteen percent believe it will cost less than $50,000 and 15% say they simply do not know.

    Source: AARP
    [via Joel]


  2. Medicare Parts A and B for 2015

    Employee Benefit Research Group
    [via Ann Miller RN MHA]


  3. Two-Thirds of Providers Aren’t at Listed Locations, CMS Finds
    [Back to Basics]

    The first phase of a new provider directory accuracy pilot conducted by CMS’s Medicare Drug & Health Plan Contract Administration Group (MCAG) has turned up some concerning findings, namely the “excessive number” of providers listed in online directories who aren’t at those locations, according to officials who spoke at the Medicare Advantage and Prescription Drug Plan fall conference.

    And if those deficiencies aren’t corrected, plans could be subject to enforcement actions once the verification portion of the project is completed.

    Of the 11,646 total locations reviewed, CMS identified 5,257 locations (46%) with deficiencies, meaning at least one or more items in the directory pertaining to that location was inaccurate, and a total of 5,352 final deficiencies. Among the most common errors were:

    • Inaccurate phone number, which occurred 521 times, or 9.7% of all deficiencies.
    • Incorrect address, which happened 450 times, or 8.4% of all deficiencies.
    • Provider is not accepting new patients, which happened 338 times, or 6.3% of all deficiencies.
    • Incorrect address-suite number, which occurred 221 times, or 4.1% of all deficiencies.

    Source: Lauren Flynn Kelly, AIS Health via Medicare Advantage News [10/13/16]


  4. Poll: % of Individuals that Think Medicare Should be Changed as Opposed to Unchanged, by Age Group

    1. 39% of respondents ages 18-29 think that Medicare should continue, 41% think it should be changed.
    2. 51% of respondents ages 30-44 think that Medicare should continue, 32% think it should be changed.
    3. 52% of respondents ages 45-54 think that Medicare should continue, 32% think it should be changed.
    4. 66% of respondents ages 55-64 think that Medicare should continue, 24% think it should be changed.
    5. 67% of respondents ages 65+ think that Medicare should continue, 19% think it should be changed.
    6. 16% of all respondents were unsure, or didn’t have an opinion.

    Source: Morning Consult


  5. HSAs and Medicare?

    Does Medicare make sense for seniors with employer health coverage?



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