As a practitioner, we strive to add value to the advisor-client relationship. This often requires a broad knowledge on a wide array of subjects. In this post, we will discuss Medicare. We will explore the various parts of the program, the costs, the eligibility rules, and the consequence of missing the enrollment deadline. I have included several inks for more information.
Medicare was enacted in July 1965 under Title XVIII of the Social Security Act. Fifty-three years later, Medicare has four parts as follows:
- Part A: Hospital
- Part B: Outpatient Services
- Part C: Medicare Replacement
- Part D: Prescription Drugs
Rules of Eligibility
Generally, if you are 65 and you or your spouse have paid Medicare taxes for at least 10 years, you may enroll. Persons under 65 may enroll if they are disabled or have End Stage Renal Disease. To see if, or when you will be eligible for Medicare, click here.
Cost of Medicare
Part A: This is free for most people. If you did not pay Medicare taxes, you may be able to enroll in the program and pay for Part A. If you are under age 65 and did not pay into Medicare, you may be eligible if you have been entitled to Social Security or Railroad Retirement Board disability benefits for 24 months or you are a kidney dialysis or kidney transplant patient.
Part B: Everyone must pay a premium for Medicare Part B, which is deducted from your Social Security retirement payment. If you are eligible but have not yet started to receive a Social Security retirement benefit, Medicare will send you a bill. To calculate your cost for Medicare Part B, click here.
Part C: This is also known as a Medicare Advantage plan and is issued by a Medicare-approved private insurer. Even if you choose Medicare Part C, you must still pay a Part B premium. Although these plans cover all services in Part A and Part B, they often include additional benefits such as vision, dental, hearing and prescription drugs.
Part D: This part covers prescription drugs. All Medicare drug plans will have a list of approved drugs and a “tier” for each. A lower tier drug will generally cost less, and a higher tier drug will cost more.
- To find out what Medicare drug plans cover, click here.
- To find out how to get Part D coverage, click here.
- To learn about the cost of Medicare Part D, click here.
Late Enrollment Penalties
The window to enroll in Medicare begins on the first day of the third month prior to your birth month and ends on the last day of the third month following the month of your birth. I realize this may sound complicated, but it is not. For example, if your birthday occurs in August, your seven-month enrollment period would begin May 1 and end November 30. The consequence of enrolling late is rather severe. There is a separate “late-enrollment” penalty for Part B and Part D.
Part B Penalty: If you miss your enrollment window, your premium for Part B may increase by 10% for each full 12-month period you were eligible for coverage but did not have it. Moreover, if you are late, you may have to wait until the General Enrollment Period (Jan 1 to Mar 31) to enroll. Coverage will begin July 1 of that year. The additional premium will continue for as long as you have Medicare. It is perpetual. There are a few exceptions. For more information, click here.
Part D Penalty: You may be subject to a Medicare Part D late enrollment penalty if you go 63 continuous days (or more) beyond the end of your initial enrollment period and you did not have:
- A Medicare Prescription Drug Plan
- A Medicare Advantage Plan (Part C)
- Another Medicare plan that offers prescription drug coverage, including a plan through an employer or union
The calculation for the Part D penalty can be found here.
If you have clients approaching 65, and your services extend beyond asset management, this is one area you can demonstrate added value.
Thanks for reading and have a great week!