Medicare Facts and Penalties You Need to Know

Start with the basics, to make sure you’re making informed decisions.

Created in July 1965 as part of the Social Security Act, Medicare is how most adults over age 65 cover their healthcare costs. Medicare has four parts. They are Part A: Hospital, Part B: Outpatient Services, Part C: Medicare Replacement and Part D: Prescription Drugs. This useful article from Think Advisor, “Essential Medicare Facts & Penalties Advisors Should Know on One Page,” covers Medicare fundamentals.

As a general rule, if you are 65 and you or your spouse have paid Medicare taxes for at least 10 years, you may enroll in the program. Those under 65 may also enroll, if they are disabled or have end stage renal disease.

Let’s look at the different parts of Medicare:

Part A is free for most people. If you didn’t pay Medicare taxes, you may be able to enroll and pay for Part A. If you’re under 65 and didn’t 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.

Everyone is required to pay a premium for Medicare Part B, which is deducted from your Social Security retirement payment. If you’re eligible but haven’t yet begun to receive a Social Security retirement benefit, Medicare will send you a bill.

Part C is also known as a Medicare Advantage plan. It’s issued by a Medicare-approved private insurer. Even if you choose Medicare Part C, you still are required to pay a Part B premium. Although these plans cover all services in Part A and Part B, they frequently have other benefits like vision, dental, hearing, and prescription drugs.

Part D covers prescription drugs. Each Medicare drug plan list its approved drugs and a “tier” for them. A lower tier drug will generally cost less, and a higher tier drug will cost more.

The window to enroll in Medicare starts 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.

There is a separate “late enrollment” penalty, if you go 64 continuous days or more beyond the end of your initial enrollment period and did not have a Medicare Prescription Drug Plan, a Medicare Advantage Plan (Part C) and another Medicare plan that offers prescription drug coverage, including a plan through an employer or union.

Make sure to review your coverage and plan in advance to avoid any penalties. If you make a mistake, you may end up paying a premium for certain types of coverage, for as long as you have Medicare.

Reference: Think Advisor (July 31, 2018) “Essential Medicare Facts & Penalties Advisors Should Know on One Page”