On Retirement

My Medicare year

The year before you turn 65 is a good time to review your Medicare options

Jan 21, 2019 @ 7:00 am

By Mary Beth Franklin

I turned 64 last December. That means I am eligible to enroll in Medicare at the end of this year. Based on the inquiries I have received from friends and InvestmentNews readers, the Medicare enrollment process is filled with angst. But with a little preparation and help from online tools — and sometimes professional advisers — this critical step in the retirement journey can be accomplished with a minimum of pain.

While the traditional retirement age of 65 is still a key milestone for Medicare eligibility, the full retirement age for Social Security benefits is 66 or older, depending on your birth year. The decoupling of the eligibility ages for these two essential retirement programs — and the fact that many people continue to work beyond traditional retirement age — complicates Medicare enrollment decisions.

The year before turning 65 is a good time to review your Medicare options. The first question you need to ask yourself is whether you or your spouse plan to continue working past age 65 and whether you will be covered by an employer's group health insurance plan.

If the answer is yes, you can defer Medicare enrollment, penalty-free, until that employer coverage ends. But even that exemption raises its own questions.

I received an email recently from a reader who wondered how soon she had to enroll in Medicare once she retired. She assumed it would be during the annual open enrollment period, which runs from Oct. 15 to Dec. 7 each year. While that is a logical assumption, it is wrong. Because of her continued health-care coverage at work, she is eligible for a "special enrollment period" that lasts for up to eight months after she retires or loses her insurance coverage, whichever comes first.

But if you don't have access to a group health insurance plan, defined as a company plan for 20 or more employees, you must enroll in Medicare at age 65 or face lifelong late-enrollment penalties.

That's the situation that one of my friends faced. She turns 65 in February and currently has health insurance through her husband's small business. But because the firm has fewer than 20 employees, it doesn't qualify as creditable coverage for Medicare purposes. That means she must enroll in Medicare during her seven-month initial enrollment period that began in November, three months before her birthday, and continues through May, three months after her birthday.

I must compliment my friend on her impressive transformation from Medicare neophyte to well-informed consumer over the past few months.

At the beginning, she was vaguely aware of the difference between original Medicare, which includes basic hospitalization and medical insurance, and all-inclusive Medicare Advantage plans that offer extra benefits in exchange for using network providers. But by the end of what she described as "an incredibly exhausting process," she could clearly articulate why she chose a Plan G Medigap policy and how she selected the most appropriate prescription drug plan for her health situation.

"I think the medicare.gov site is very good," she wrote in an email to me documenting her enrollment experience.

"But there is a tremendous amount of information when it comes to selecting the actual insurance company for drugs and supplemental plans," my friend added. "I had to call some insurance companies because they don't have premium estimates listed on their website."

Another friend who also turns 65 in February, and who spent most of her career working in health care, wrote: "My mind is blown and overwhelmed choosing the drug plan. Monthly fees, deductibles, copays, coinsurance, donuts, pricing tiers — I need help!" She and her husband plan to meet with a medical insurance consultant to select their specific drug plan and Medigap policy.

I confess, I expect to have a much easier time when it comes to enrolling in Medicare — not because I have experience writing about the topic, but because I will need to make fewer choices.

One of the benefits of being married to a retired federal employee is we both have retiree health benefits for life. My husband, Mike, enrolled in Medicare when he turned 65 and his federal health insurance serves as his Medigap policy. But because it was my only insurance, we chose a comprehensive plan. Once I enroll in Medicare at the end of the year, we can scale back to a less-expensive health insurance policy designed to serve as Medigap coverage. And because the federal health plan includes prescription drug coverage, I won't need to choose a Medicare drug plan.

Perhaps the best advice on how to tackle Medicare enrollment came from a volunteer health counselor who posted her comments in response to my recent Medicare cover story.

"Those soon to be Medicare-eligible will need to take the initiative," the counselor wrote. "Allow plenty of time to understand your options, weigh your tradeoffs and ask follow-up questions," she suggested. "Finally, be prompt with decision. Medicare tolerates no slack in deadlines."

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