Medicare is a federal health insurance program in the United States that is for several different groups of people. Most individuals qualify for this coverage because they reach the age of 65. Some younger people with a disability receive it, as do individuals with End-Stage Renal Disease.
You must receive a diagnosis of permanent kidney failure that requires a transplant or dialysis for the latter to apply.
Unless you have a disability and have acquired benefits from Social Security for at least 24 months, you must enroll in Medicare to receive your coverage.
The Four Parts of Medicare Coverage
There are four different parts of Medicare that help to cover specific health-related services that you might require. Each option is designated by a letter of the alphabet, ranging from A-D.
Medicare Part A
Medicare Part A provides hospital insurance. It will cover any inpatient stays, skilled nursing facility care, and hospice services. This option will also offer some home health care choices for some recipients. As part of original Medicare, you can go to any doctor that accepts this insurance program.
Medicare Part B
Part B covers your generalized medical insurance. This branch of Medicare is responsible for medical supplies, preventive services, outpatient care, and the services provided by your doctor. It will also cover ambulance services, clinical research, and even a second opinion if you receive a surgery recommendation.
This coverage is usually the primary form of insurance that you’ll use once you transition to this federal program. You will receive some limited outpatient prescription drug coverage with this option under limited conditions too.
Medicare Part C
Medicare Part C is also called “Advantage,” and it is an alternative way to receive your Part A and Part B benefits. You are not eligible for this option unless you have already qualified and are enrolled in Medicare Parts A and B. You must also reside within the service area of the plan that you want.
Some plans do offer out-of-network coverage, but you’ll want to find out how close your medical providers and pharmacies are to your home.
Medicare Part D
Part D adds prescription drug coverage to some Medicare plans. If you have the original Medicare, a Medicare medical savings account plan, a cost plan, or a private fee-for-service plan, then you choose this optional benefit as part of your health care coverage.
If you are not sure about the coverage you currently have through Medicare, then all you need to do is check your red, white, and blue card. You can also check with any other insurance options that you have to supplement your coverage.
Medicare Costs to Consider Before Enrollment
If you decide to enroll in original Medicare, then there is no limit on how much you could pay out-of-pocket each year. The only exception to this rule is if you have supplemental coverage to help you manage potential gaps.
Medicare Part C does have a yearly limit on your out-of-pocket costs. Once you reach that threshold, then you’ll pay nothing for your covered services for the remainder of the year.
Medicare Part A is free to anyone who had 40 quarters of qualifying employment. Part B standard premiums were set at $135.50 per month in 2019. Your Part D costs will vary based on the provider you choose.
HSAs and Medicare Information
Health Savings Accounts, or HSAs, are accounts that help individuals with a high-deductible health plan manage their qualified medical expenses. Some employers oversee this account, but many people have one that receives supervision from their financial institution or insurance company.
If you have an HSA and will be eligible for Medicare shortly, then you will want to know how enrollment will impact your Health Savings Account.
Once you enroll in Medicare Part A or Part B (or both), then you can no longer contribute pre-tax money to your HSA. Health Savings Accounts require someone to have no other health insurance other than their high-deductible plan.
When your Medicare starts, then the HSA account overseer must change your contribute to $0 per month. You will still have the option to pay for qualified medical expenses from this account with the funds remaining tax-free if you continue to follow the rules.
If you continue to contribute pre-tax money while receiving Medicare, including retroactive coverage, then you may be subject to a 6% excise tax. You can avoid this issue by withdrawing your excess contributions before your tax return filing deadline, including any extensions for which you are eligible during the contribution year.
The timely removal of excessive contributions will help you to avoid the 20% additional tax that applies to any non-medial distribution from the HSA. That tax doesn’t apply to distributions after the age of 65, but they must be included in income for federal tax income unless previously treated as taxable.
Because enrolling in Medicare with a funded HSA can create complex wealth management situations, you’ll want to review your unique situation with a professional financial or tax advisor to ensure you make the correct decisions about your future.