Report Summary:

• The “four parts” of Medicare and how to enroll
• Are you eligible if you are still working?
• What if you’re retiring and losing health insurance?
• How to lower your premiums when your income goes down

Professors Give Themselves a “B” for Financial Literacy

College professors take great pride in helping students learn new concepts. But according to Fidelity Investments’ 2017 Higher Education Faculty Study, when it comes to grading their own financial literacy, professors admit they’d give themselves a “B” grade.

When asked where they need financial help, the top response among professors was understanding Medicare/healthcare costs — inspiring us to produce this educational report for the benefit of all professors.

Medicare is a government-run program designed to provide healthcare for those aged 65 and older. Currently, 56 million Americans are covered by the program. While this equates to roughly one in six Americans, everyone will be impacted by the program now or in the future. This report outlines program highlights, along with the pitfalls that may affect special circumstances.

Medicare was signed into law in 1965 with Harry S. Truman as the first recipient on July 1, 1966. It was only fitting since Truman originally proposed this plan to Congress in 1945.

There are Four Parts to Medicare

• Medicare Part A includes coverage for hospitals and associated costs for inpatient care. There is a deductible for each benefit period associated with a hospital stay along with a coinsurance amount. As long as you’ve paid into the system for 40 quarters, there’s no monthly premium for Part A.
• Medicare Part B generally covers doctors and services outside of the hospital. You’ll pay a small deductible based on income and then are responsible for 20 percent of the Medicare-approved amount for most doctors’ services, durable medical equipment, and outpatient care. Unlike Medicare Part A, there is a monthly premium for Medicare Part B.
• Medicare Parts A and B are considered original Medicare and have no limits to the amount you may spend out of pocket. As a result, most people add either a Medigap policy or Medicare Advantage Plan (Part C).
• Medicare Part D refers to the prescription drug program. The program is run by private companies and includes co-payments and deductibles. Making sure your prescriptions are covered is very important. The Medicare.gov website provides functionality for entering your prescriptions to find the best coverage options for your situation. This is where many people start.

Medigap policies allow you to see any doctors and hospitals that participate in Medicare, but these plans typically do not offer a prescription drug plan. You must purchase this separately.

Medicare Advantage plans (Part C) is similar to an HMO or PPO in that the services you receive are provided by specific hospital and doctor networks. Medicare Advantage plans typically include a prescription drug plan.

Both types of policies help to cover the deductibles and co-payments that Medicare Part A and Part B don’t cover. There are many options under both types of plans, and the amount you pay will be determined by the type of policy you choose.

How Do I Enroll in the Program?

If you’re enrolled in Social Security at age 65, Medicare will automatically enroll you in Part A and Part B. You’ll receive your red, white, and blue Medicare card in the mail, and they’ll deduct your Part B premiums from your Social Security check. If you’re not enrolled in Social Security at age 65, Medicare will not send you a notice. The enrollment period is the seven months surrounding your 65th birthday and includes the three months prior to the month of your birthday, the month of your birthday, and three months following your birthday month.

There are three enrollment options:

• Online application
• Calling Social Security
• Visiting the Social Security office

What if I’m Still Working?

If you’re still employed at age 65 and have a health plan at work, Medicare will typically act as the secondary payer. It’s important that you have a conversation with your benefits office to confirm this. You’ll also want to ask your benefits office if their drug coverage is considered “creditable” or equal to the coverage under Medicare. If you use drug coverage that’s not considered “creditable,” you’ll be considered to have missed your enrollment period and subject to delays and penalties.

If Medicare is acting as the secondary payer, there’s little reason to pay for Medicare Part B. Part A is free, so if you don’t have a high deductible health plan (HDHP) with a Health Savings Account (HSA), you can sign up for Part A.

If you do have an HDHP with an HSA, you won’t be able to sign up for Part A or B. IRS rules say that you can’t contribute to an HSA if you’re enrolled in Medicare.

Some universities now require their faculty to enroll in Medicare Part A when they become eligible. You’ll want to check with your benefits office to see if this is the case.

I’m Retiring After Age 65 and Losing My Health Insurance. Now What?

If you remain under employer health coverage until retirement at age 65 or older, you have eight months to sign up for Medicare without penalty. This is called the “Special Enrollment Period,” and during this period you can sign up for Medicare without paying a penalty. Having COBRA coverage does not affect this deadline.

What About My Drug Coverage?

The timeframe for signing up for a prescription drug plan is even shorter. Once you retire, you have only two months to sign up for either a Medicare Prescription Drug Plan or a Medicare Advantage Plan. Missing the deadline will result in penalties and delays to your coverage. Having COBRA coverage does not affect this deadline.

Are the Income-Related Medicare Adjustment Amounts (IRMAA) Permanent?

If you’re still working at age 65, there’s a good chance you’re paying more than the standard rates for Part B and Part D coverage. The additional IRMAA payments you must make are based on your income from two years ago. If there’s a change in your circumstances, such as retirement, you can file a form SSA-44 showing the most recent year’s income and your expected income the following year. By filing this form when your income goes down, you should be able to lower your premiums for these plans.

While Medicare Part A does offer hospice or end-of-life care, there is no coverage under Medicare for long-term care. This is an area in which we have much experience. We’re happy to have this discussion with you.

Remember, it’s always best to contact Medicare, your university benefits office, and your financial advisor directly with any questions you may have regarding your coverage options.

This is intended for informational purposes only and should not be construed as personalized financial or investment advice. Please consult your financial and investment professional(s) regarding your unique situation.

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