Medicare Decisions at 65

What should you do about Medicare when you turn 65?

Before you turn 65 you start receiving solicitations for Medicare Supplemental Insurance.  Part of the sales tactics is that they scare you with a penalty if you wait to elect, which is false.  There is much confusion so let’s review your options and make a clear and concise decision on what is best.

Are you working for a company that offers benefits?

If you are still working and are offered benefits from your employer, you should carefully calculate your cost of staying on your current plan, switching to a different plan or enrolling in Medicare and Medicare Supplements. Cost and coverage are the important factors in your decision.   

Generally, your employer heavily subsidizes the cost of coverage for their employees, covering 70 – 100% of the cost.  They usually also cover a good amount of the cost for dependent coverage for your spouse as well.  You will want to create a “cost analysis” of your annual cost to stay on your company plan.  Don’t forget to include Dental and Vision as well.

The quality of the plan, what it covers and what out-of-pocket expenses you are responsible to fund is the other part of the equation.  “Fixed cost” is what you pay to have coverage and “variable cost” is what you pay out of your pocket when you access provider services.   There is always a “Maximum out-of-Pocket” protection for a plan year as well.

Have you elected to be in a “High Deductible Health Plan (HDHP)” with an HSA bank account attached?  The rules are very tricky as to IF you elect Medicare Part A and IF you fund your HSA account.  HSAs have become very popular, especially for those who try to accumulate a large balance of tax-free dollars for “qualified expenses”.  You may remain HSA eligible past Age 65 if you do NOT enroll in Medicare.  HSA rules make a distinction between being merely “eligible” for Medicare (keep your HSA eligibility) and being “entitled” to or “enrolled” in Medicare (lose HSA eligibility).  You become enrolled in Medicare under Part A by filing an application or being approved automatically.  The Social Security Administration automatically “enrolls” you in Medicare Part A when you begin collecting Social Security benefits.  If you have NOT elected Social Security and have NOT enrolled in Medicare and are otherwise HSA eligible, you can continue to contribute to an HSA after 65 (plus the $1,000 catch-up).

Spouse under Age 65

If your spouse is under age 65 you are likely wanting to stay on your employer’s plan.  Your spouse can’t elect Medicare, likely does not want to start Social Security benefits, and needs quality health coverage.  The trick is, employers only offer coverage to employees and their dependents, not just to dependents.  You can elect COBRA continuation if only needed for a short period but that can be expensive.  Be sure you consider your options. 

Electing Social Security Benefits

Once you elect Social Security benefits you MUST enroll in Medicare Part A.  You will, therefore, no longer be able to contribute to an HSA account. One choice would be to continue your coverage under the HDHP but have your spouse fund the family contribution ($7,200 + $1,000) into their own HSA plan. If your employer normally contributes to your HSA, you will NOT be eligible to receive their contribution.  You can use your accumulated balance to meet your out-of-pocket expenses and continue to build tax deductible savings in your spouse’s account.

At this point, you should work with a Medicare Supplement specialist who can lay out the coverage options and costs so you can make an informed decision.  This also may be the time to switch to a regular, non-HSA type medical plan with your employer.

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