Government Social Systems tend to become underfunded over time, and Medicare’s insolvency is not far off. In the absence of change, reduced benefits are certain in the future. Most likely, the near future. Many experts are forecasting insolvency as soon as 2024. Clearly, something must be done, but Congress and this Administration have shown little propensity to broach the subject.
Funding problems are not the subject of today’s Blog, and will instead be discussed over time, as reasonable solutions are proposed and considered. Today we are looking at widely held misconceptions regarding Medicare. Also, we are limiting this current discussion to the 52 million+ over-65 recipients, as well as the thousands of Americans who are turning 65 every day. Disability is a complex subject and pertains to a small minority of Medicare recipients. We will discuss Disability Benefits at a later date.
Medicare is not free. Far too many Americans believe that Medicare is free. Most people do receive Part A (hospital coverage) free, but Part B (doctors, etc.) and optional Part D (prescription drugs) are never free. Premiums are partially based on income level, with IRMAA (Income Related Monthly Adjustment Amount) surcharges (taxes) applying to higher-income recipients. Medicare premiums are deducted from Social Security benefits for current enrollees.
Enrollment is not automatic. Many people believe that as they turn 65, Medicare will place them into the program. They are incorrect; all Americans must qualify and make application to receive Medicare benefits. Qualification requirements mirror those of Social Security. To earn benefits, the applicant (or a spouse) must have qualified by working and paying into the system through payroll taxes for 40 calendar quarters. All applicants must have attained 65, though application can be made with 3 months of reaching age 65.
Delayed applications, penalty-free. Any American turning 65 and covered by a group health plan (or a spousal health plan) may delay filing for Medicare until personal coverage lapses. Following the loss of private coverage, Medicare application must be made with 8 months. These deferrals are penalty-free.
Penalties for late enrollment. Americans who fail to enroll by age 65, and who do not qualify for a penalty-free delay, will be fined through a surcharge in their Medicare premiums. Eligibility for Part A carries a 10% penalty for twice as long as the delayed filing period. Failure to enroll in Part B carries a 10% penalty for each 12 months of delay. This surcharge is cumulative and permanent.
Know the rules, and you will avoid incurring penalties, while retaining important continuous health insurance coverage.
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