What is it?
Part A of Medicare is known as “Hospital Insurance”. It’s one of the two Parts of “Original Medicare” that is provided directly by the federal government (Part B being the other). Refer to the block diagram below to see where it fits into the big picture:
What Does it Cover?
Part A seems to apply to a fairly limited scope of healthcare needs as opposed to Part B. However, it does cover several things not covered under Part B. As long as your healthcare need is considered “medically necessary” it will be covered by either Part A or Part B. However, there is usually some part of the cost-sharing that the beneficiary is responsible for. That’s discussed later in this article in more detail.
Here is a list of things specifically covered under Part A:
How Much Does it Cost?
As long as either you or your spouse worked and paid Social Security taxes for at least 40 total quarters (10 years), you’ll qualify for premium-free Part A. If you have less than 40 quarters but your spouse has 40 or more quarters, they must be at least 62 in order for you to get Medicare benefits off of their record. If you and your spouse both have less than 30 quarters, your Part A premium will be $422 in 2018. If you (or they) have between 30 - 39 quarters, your premium will be $232.
A deductible is essentially your part of the cost sharing that you pay in full before the insurance kicks in and starts to pay its part. We’ve already talked about the “blood-deductible” above (ewww). For hospital stays, the patient has the responsibility of a $1,340 deductible in 2018. However, this is not an annual deductible, it’s a “benefit period” deductible. A benefit period is defined as starting the day you’re admitted as an inpatient and ending when you’ve been released for 60 consecutive days. So there’s a chance that if you’re admitted, released, and then re-admitted within 60 days, you could have a fairly long benefit period.
If you now are subject to a benefit period of longer than 60 days, you as the Medicare beneficiary are responsible for a coinsurance payment of $335 per day for an inpatient stay during days 61-90 of your benefit period. The daily co-insurance amount during this period is ¼ of the Part A deductible. If your benefit period happens to extend past 90 days, you then have 60 “lifetime reserve days”. Your coinsurance during these 60 days is $670 per day, which is ½ of the Part A deductible.
You also are responsible for coinsurance if your SNF stay lasts longer than 20 days. For days 21-100, the beneficiary is responsible for a co-insurance of $167.50 per day.
How Do I Pay For it?
Anyone who doesn’t qualify for premium-free Part A will get a monthly bill. You will receive a “Notice of Medicare Premium Payment Due” (CMS-500). You can pay the bill directly or sign up for Medicare Easy Pay to have the payments auto-deducted from your bank account of choice.
For the inpatient deductible and co-insurance amounts, you’ll generally be billed directly by the provider or facility where you receive treatment. If you have Medigap insurance, it can pick up most or all of these cost shares for you.
How Do I Sign Up, and When Will it Start?
Please see the sections with the same questions on the Medicare overview page.
Do I Have to Sign Up?
Not necessarily. If you, or your spouse, are still working and you are covered by that employer’s group health plan, you probably don’t need to sign up for Medicare Part A or (Part B) and it might be best for you to wait. As long as that employer has 20 or more employees, Medicare is not required to be the primary insurance.
Since about 99% of folks eligible for Medicare are eligible for premium-free Part A, it’s fairly common for someone who is still working (or their spouse is still working) and covered under a group plan to sign up for Part A only, and defer Part B to when they (or their spouse) retire. This allows the group plan to be the primary insurance and Medicare Part A to be secondary. However there is one very specific reason why you would not want to enroll in Part A: it’s illegal to contribute to a health savings account (HSA) if you are signed up for Medicare, even Part A only.
Well what does this mean? A lot of employers offer their employees high-deductible group plans to help keep the monthly premiums a bit lower. To help pay for out-of-pocket costs that go toward meeting their deductible when health needs arise, employees can make contributions to an HSA, which is basically an account that can be funded specifically to pay for these expenses. HSAs are advantageous because contributing to them is tax-deductible, the funds in them can be invested and any gains are tax-free, and funds used for qualifying medical expenses are withdrawn tax-free too. So, if you want to keep contributing to an HSA after 65 and are still covered under an employer’s group plan, don’t sign up for Medicare yet.
Even if you don’t have to sign up for Part A when you’re first eligible, it may be a good idea to check with an insurance professional to look into your healthcare options. And, even though you may still be able to stay under your current group’s policy, it might be more cost-efficient to sign up for Medicare Part A and B and enroll in your own supplemental insurances (including Part D). If you’re in this type of situation, contact me to set up a quick consultation and we can discuss your options to decide which is best for you.
Lastly, keep in mind that once you or your spouse retires you have to sign up for Part A and B if you’re eligible for Medicare even if your former employer continues to provide health coverage for you as a retiree. If you are not eligible for premium-free Part A, failing to sign up at this time could result in penalties increasing your Part A premium by 10% for each 12 months you don’t have coverage. If you finally do sign up for Part A, you'll end up paying this penalty for twice as long as the period of time you didn’t have Part A but should’ve. Since that’s confusing, here’s an example: If you should’ve had Part A for the last 4 years, your Part A premium for the next 8 years will be 40% higher.
In my experience, most companies don’t offer healthcare options to retirees after they are eligible for Medicare; and even if they do, it is typically much more cost-efficient to get your own supplemental insurance. If you are retiring soon or have retired recently and would like to consider your options, or if you are retired and you or your spouse are losing your health care coverage at age 65, contact me and we’ll set up a time to review your supplemental plan options to find one that works best for you.