Medicare and Medigap Insurance

Medicare Part A

Medicare Part A, also called Hospital Insurance, covers hospital inpatient care. Most people are automatically enrolled in Part A when claiming Social Security benefits at no cost due to their Medicare taxes paid while working. Individuals who delay claiming Social Security benefits and who want to enroll in Medicare at age 65 or older will need to proactively enroll through the Social Security Administration's online retirement application (just for Medicare) or visit a local Social Security office to apply in person.

Medicare Part B

Medicare Part B, also called Medical Insurance, covers most doctor, outpatient and related expenses. Part B coverage is nearly universal, meaning almost everyone eligible enrolls. As a general rule, nearly everyone should purchase this coverage (except perhaps very high-income households). In 2019, the premium for Part B coverage is $134 per month for most people. Higher-income Medicare beneficiaries pay more. However, some people who get Social Security benefits will pay less than this amount ($130 on average). Both Parts A and B have deductibles, co-pays and coinsurance payment requirements.

Retain Group Heath as Long as Possible

If you have some form of group health insurance coverage, it generally is wise to retain that coverage as long as possible, even beyond age 65 when individuals become eligible for Medicare. At 65 or whenever the group health care coverage ceases — whichever is later — then purchase Medicare Parts B and D (and consider purchasing Medigap at the same time).

Retirees have up to eight months to sign up for Part B after their group health coverage ends. Retirees also can be enrolled in a group health care plan and Medicare at the same time; in fact, most group plans require Medicare enrollment in order to receive full benefits from the group plan.

Take Great Care When Switching

Never drop any type of health insurance coverage (group health or Medicare, or any type of prescription drug plan) until you are certain you are enrolled in your new plan. Once you drop certain coverages, you may not be able to get them back — which also could affect any dependents, such as your spouse.

Health care inflation typically runs at a higher rate than national measures of inflation such as the Consumer Price Index, which is one more reason to keep any existing coverage you can. Talk with your group health care plan administrator as well as Medicare before making any permanent changes to any type of coverage.

Medicare Part D (Prescription Drug Coverage)

Private insurance companies offer Medicare Part D, called Prescription Drug Coverage, which covers prescription drugs. Most individuals should enroll in Part D unless they have alternative coverage (such as through a group health care plan). But you should realize drug expenditures typically increase with age, and waiting until a later age (beyond 65) likely will result in paying higher premiums for this insurance. Individuals eligible for a Medicare Part D low-income subsidy program generally should go ahead and purchase the coverage and then apply for a subsidy.

Some states and certain drug companies may offer a low-cost prescription drug program. Qualifying for these programs typically depends on age, enrollment in Medicare and income level.

For more information on Medicare visit www.medicare.gov. To learn more about other benefit programs visit www.benefitscheckup.org.

Medigap

Medigap insurance, which is more formally known as “Medicare Supplement Insurance,” covers coinsurance amounts, copayments and/or deductibles for the costs of Medicare-provided services (such as Parts A and B). There are ten Medicare supplement plan types which go by the letters A to N, offering a variety of benefits. All of the policies are standardized, offering the same basic benefits. Currently, almost all elderly households have some form of prescription drug and insurance coverage for the gaps in Medicare.

You usually should buy a policy at the same time you enroll in Medicare Part B unless a former employer provides quality retiree health benefits at an affordable cost. There is a 6-month Medigap open enrollment period when you can buy any Medigap policy sold in your state, even if you have health problems. If you wait until a later date to purchase a Medigap policy, you may be denied a policy due to medical underwriting (poor health conditions). Buying a policy when enrolling in Part B also avoids any late enrollment penalty. You only need one Medigap policy however; there is no benefit or reason to buy multiple plans.