Money Matters

If you're 65, sign up for Medicare

CorrespondentNovember 15, 2009 

Q: I have been told by my retired friends that I need to sign up for Medicare as soon as I turn 65 to avoid any potential cost increases due to pre-existing conditions. I turn 65 next month, but thanks to my "201k" value, I plan to work as long as possible. I receive health insurance through work. Do I need to sign up and if so, do I need both parts A & B (someone mentioned a part C, but I have no idea what that entails). You need to contact your employer and verify that your current coverage will continue at age 65. If your coverage stops, you definitely want to sign up for Part A, and Part A may still be of benefit as it may cover some costs not covered by your group plan.

Part A is free for most U.S. citizens age 65 or older. You should sign up within a seven-month window, which begins three months before you turn 65 and ends three monthsafter the month in which you turn 65. Part A helps pay for inpatient care in a hospital and skilled nursing home care followed by a hospital stay, some home health care and hospice care. This is not a substitute for long-term care insurance because of the limitations ofcoverage.

Part B helps pay for services provided by doctors and other medical services and supplies not covered by Part A. You will pay for Part B, and the amount you pay will vary according to your income.

If your group plan will remain your primary health plan after you reach age 65, Part B may be of minimal benefit, and it may not be worth paying the premium. In addition to the potentially redundant coverage and cost, signing up for Part B before you need a Medigap policy will probably eliminate your Medigap open enrollment period. Missing the Medigap open enrollment period may cause you to be subject to medical underwriting, higher premiums and pre-existing condition limitations.

If you delay signing up for Part B because you are covered by your employer, you will not pay higher premiums due to the delay as long as you enroll during your "special enrollment period." The special enrollment period begins when you no longer have group coverage and ends eight months later. If you do not enroll during this special enrollment period, you will need to wait until the general enrollment period, and you will pay a 10 percent premium surcharge for late enrollment. This delay would also eliminate your open enrollment period for the above mentioned Medigap policy.

Part C is a Medicare Advantage plan that is similar to a Medigap policy (also called supplemental plans). These plans provide additional benefits to Parts A&B and these plans offer similar benefits. Both plans require that you are eligible for Medicare Part A and that you are paying the premium for Part B. Your monthly premium for these plans will depend on the coverage offered.

Compare prices and benefits before you enroll in either a Medicare Advantage or Medicare Supplement Plan. As a rule of thumb, if you are in relatively good health, an Advantage plan with a lower monthly premium and more cost sharing may be a better choice than a Medigap plan offering more coverage but at a higher premium. The Social Security Administration (1-800-772-1213 or www.ssa.gov) can answer many questions.

As with all major financial decisions, a meeting with a personal advisor may be advantageous.

Holly Nicholson is a certified financial planner in Raleigh. Reach her at www.askholly.com www.askholly.com or P.O. Box 99466, Raleigh, NC 27624. She cannot answer every question.

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