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Medicare

Q&A: Small firms have special Medicare Part B rules

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Dear Liz: You recently answered a question about whether someone 65 or older with employer-provided health insurance needs to sign up for Medicare Part B, which covers doctors’ visits and requires paying premiums. Your answer was correct for an employee of a large employer. If the employer has 20 or more employees on a typical business day, then the group insurance coverage is primary when the employee has both Medicare and group insurance. So the employee does not need to purchase Medicare Part B. However, if the employer has fewer than 20 employees on a typical business day, then Medicare is primary for the employee. In that situation, the employee should buy Medicare Part B. The group health plan will not pay what Medicare should have paid had the employee elected Part B. Your answer needs the appropriate clarification.

Answer: The question was from a spouse who wanted to make sure that the rules covering her husband — the employee — also applied to her, which they do. The employee was told by his employer that he would not need to purchase Medicare Part B until he retired (and even then, there is an eight-month grace period before penalties start to accrue). That applies to spouses covered by the health insurance as well.

But you’re correct that smaller companies have different rules. It’s always a smart idea to seek clarification directly from a company’s human resources department and the health insurer as well as from the Medicare helpline at (800) MEDICARE ([800] 633-4227).

Q&A: Medicare Part B allows an eight-month grace period

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Dear Liz: I have a question after reading your column about avoiding costly Medicare mistakes. My husband and I have both reached 65 this past year. We both signed up for Medicare Part A hospital coverage, which is free. I retired two years ago, but am covered by my husband’s employer’s health insurance. I’m now confused about whether I should have signed up for Medicare Part B, which covers doctors visits but requires monthly premiums. His employer explained to him that he would avoid penalties if he signed up for Part B within eight months of his retirement, but no one has mentioned his wife.

Answer: You’re covered under the same rules. As long as your spouse is still working and you’re covered by that employer’s health insurance, you don’t have to sign up for Medicare Part B. But, as your husband’s employer noted, when that employment ends you both should enroll in Part B within eight months to avoid future penalties.

Q&A: How to avoid the costly Medicare mistake that too many people make

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Dear Liz: My husband retired last year at 74. He had originally signed up for Medicare Part A and Part B. But during his employment, he cancelled Part B because of the company’s private health insurance. When he retired, we used COBRA to continue that insurance coverage for our family. (I’m not Medicare eligible, and we have a son.) Our COBRA coverage ends in a few weeks.

My husband was told he has to wait until January 2019 to enroll in Part B and will not have coverage until July 2019. He is ineligible for VA benefits and has costly medical expenses. I was able to get an Obamacare plan because coming off COBRA triggers a special enrollment period for me, but he cannot get coverage because he is Medicare eligible.

What a dilemma. No one told us when he retired that he should get back on Part B right away and not take the COBRA offered. Now, when he does get Part B, he will also pay a 20% premium penalty each month for life. We are shocked that the system works like this. Any ideas how to get out of this mess?

Answer: Your husband isn’t alone in misunderstanding the importance of signing up for Part B after retirement. Unfortunately, there’s probably no remedy.

For those who don’t know, Medicare Part A is the hospital coverage that’s provided to people 65 and older. They don’t pay premiums for this coverage. People do, however, pay premiums for Medicare Part B, which covers doctors’ visits and other medical costs. Those who are still working and covered by an employer’s plan often forgo Medicare Part B. Once their employment ends, though, they’re expected to sign up for Part B within 8 months or they pay a 10% premium for every 12 months they failed to sign up. They also have to wait for the regular Medicare enrollment window to roll around, which can leave them exposed to some hefty medical bills in the meantime.

“This is the biggest mistake people make and seriously this rule needs to be changed,” says Carolyn McClanahan, a physician and certified financial planner in Jacksonville, Fla.

There is a process known as “equitable relief” that allows people to request immediate enrollment and the waiving of the penalty, but you have to prove that the failure to enroll was the result of “error, misrepresentation or inaction” by a federal employee or anyone authorized by the federal government to act on its behalf, according to the Social Security Administration. So it’s not enough to inadvertently make a mistake. You have to prove you were misled. You can read more here: https://www.medicarerights.org/PartB-Enrollment-Toolkit/Equitable-Relief.pdf

Q&A: High earners need to watch out for Medicare surcharge

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Dear Liz: When I retired at age 70, I anticipated receiving the maximum available Social Security benefit payment because I had paid in the maximum tax for my entire career. I did not anticipate the heavy hit my spouse and I would take in monthly income-adjusted Medicare “premiums.” (I say “tax” is a more appropriate description.) We now pay over $500 per month each, or more than $12,000 per year! I know I am blessed to have the income I have in retirement, but that is because we were thrifty and worked hard and saved.

Answer: Many high-income retirees are unaware of “IRMAA,” or Medicare’s income-related monthly adjustment amounts, so they can come as a bit of a shock. These adjustments begin when modified adjusted gross income exceeds $85,000 for singles or $170,000 for couples. At that level, Medicare recipients pay an additional $53.50 for Part B, which covers doctor’s visits, and $13.30 extra for Part D prescription drug coverage, on top of their regular premiums. (Regular premiums for Part B are $134 a month, while premiums for Part D vary by the plan chosen.) The adjustments increase as income rises until they max out at $294.60 for Part B and $74.80 for Part D when modified adjusted gross income exceeds $160,000 for singles or $320,000 for couples.

Medicare Part A, which covers hospital visits, remains free for all Medicare beneficiaries.

That $12,000 a year may feel like a lot, but healthcare is expensive in the U.S. Annual premiums for employer-sponsored family health coverage reached $18,764 last year.