Don't be penalized for retiring!
If you plan on retiring soon, you need to understand how your Medicare benefits work. If you make an enrollment mistake, you may be financially penalized for your entire benefit period. Medicare Parts A, B and D have late penalty charges if you do not enroll in a timely manner. Most consumers receive Medicare Part A without a monthly premium, and penalties are not common because they have worked 40 or more quarters of Medicare-covered employment. However, this is not the case for Part B and Part D.
Part B has a monthly premium of $104.90 in 2014 unless you have an income-related adjustment. If you do not enroll when you should, your monthly premium for Part B may go up 10% for each full 12-month period that you could have had Part B but didn’t sign up for it.
How do you avoid a Part B penalty?
You need to review your health care coverage when you turn 65 to make sure it is considered creditable. If you continue to work and keep this creditable coverage, then you do not need to enroll in Part B until you decide to retire at a later age.
Here’s where it gets tricky. You have 8 months to sign up for Part B without a penalty after your last day of work. You will need to coordinate when your Part B begins and when your employer health care coverage ends. COBRA does not count, so do not consider that coverage when you calculate your 8 months. Who do you contact to enroll in Part B? Call Social Security at 1-800-772-1213.
Part D has a monthly premium based on which Medicare prescription plan you select. There is an income-related adjustment—just like your Part B—if you qualify. If you do not enroll at the right time, the late penalty is calculated by multiplying 1% of the “national base beneficiary premium” ($31.17 in 2013) times the number of full, uncovered months that you were eligible but didn’t join a Medicare prescription plan and went without other creditable prescription drug coverage. If you continue to work after turning 65 and have creditable prescription drug coverage, then you can delay enrollment without penalty.
Once you do decide to retire you will need to coordinate when your employer health care coverage ends and your Part D begins, just like Part B. However, you only have 63 days to make a Part D enrollment decision.
How do you decide which prescription drug plan is best for you?
You can use the Plan Finder on www.medicare.gov by entering your personal information and running a plan comparison. TN SHIP counselors are available to walk you through this process or make the comparison for you. You may be surprised that the lowest monthly premium plan is not necessarily the lowest cost plan available to you. And your neighbor's plan, even if it is right for them, isn’t necessarily the best plan for you. Part D plans are set up to be individualized, so they will not be the same for everyone. How do you enroll? Enrollment can be through www.medicare.gov, by calling the plan directly, or using TN SHIP.
Why would I want TN SHIP counselors to help me?
TN SHIP is a grant program funded by the Centers for Medicare and Medicaid to assist consumers in understanding their Medicare benefits. These certified counselors do not represent any insurance companies or their products and do not even want to give the appearance of endorsing one company or product over the other. If you choose to use someone else, they may be more interested in receiving a commission for enrolling you in a particular plan than in which plan will cover all of your prescriptions at the lowest estimated cost to you.
You can contact TN SHIP at 1-877-801-0044. All calls are routed to one of the 9 Area Agencies on Aging and Disability (AAAD) offices, where TN SHIP counselors are located. There are additional counseling sites across the state, so face-to-face sessions can also be arranged.
My wish for you is to have a happy, penalty-free retirement!
Shannon R. Jones, MPH
TN SHIP Director
Tennessee Commission on Aging and Disability
CAUTION MEDICARE CONSUMERS: If you have Medicare, you do not need to purchase health insurance through the Marketplace. Your Medicare coverage, whether received through a Medicare Advantage plan or through original Medicare, isn't changing because of the Affordable Care Act and the Marketplaces. You will still need to review your Medicare coverage during the Annual Enrollment Period, October 15-December 7th for your 2014 coverage. TN SHIP is available to help you compare plans available in your area. Call 1-877-801-0044 for help.