Can you opt out of Medicare?
You don't have to sign up for Medicare. The catch? If you don't enroll when you're first eligible, you could pay some serious financial penalties later in life.
This post comes from Marilyn Lewis at partner site Money Talks News.
Basic Medicare hospital coverage (Part A) is free for most Americans. You're covered whether you want it or not, as long as you have more than 10 years (or 40 quarters) of Medicare-covered employment, according to Medicare.gov.
But the rest of Medicare -- for doctor visits (Part B) and prescription drugs (Part D) -- is voluntary. Which means, when you turn 65, you have some decisions to make. AARP explains:
Medicare has a seven-month period in which you can sign up for Part B, which covers doctor bills and other outpatient medical costs. This period begins three months before the month of your 65th birthday, includes the month you turn 65 and ends three months after your birthday month.
The catch? If you don't sign up at that point, you could pay some serious financial penalties later in life.
All this has nothing to do with Obamacare, by the way. If you're eligible for Medicare, Obamacare doesn't apply to you.
We just said you must sign up around your 65th birthday or pay penalties later. There's one exception: If you're eligible for Medicare, are working and have health insurance through your company or your spouse's employer, you can hold off on signing up.
"Based upon your circumstances, you don't have to sign up for Medicare at age 65 and there will not be a penalty if you follow the rules," Gail Buckner wrote at Fox Business.
Before deciding, talk with your insurance agent or your employer's human resources office. Also make sure, if you decide to skip Medicare prescription drug coverage, that your plan qualifies with Medicare as "creditable." You'll find more information in this Medicare publication (.pdf file).
The penalty: Part B
Say you're 65, no longer working, and don't want to pay premiums for Part B Medicare insurance (for doctor visits) or Part D (prescription drug coverage). That's OK. But if you opt out, the costs will be higher if you want to get back in.
The reason: Insurance plans work because people who don't need the coverage pay premiums along with those who need it. Insurance plans go broke when the only people paying in are those using it.
Suppose you're 72 today. You became eligible for Medicare seven years ago, in 2006. But you waited until now to sign up for Part B. If you want to get into Medicare Part B today, your monthly premiums will include a penalty of 10% for each year you were eligible but didn't enroll, added to your premium forever, says Linda Williamson, an agent in Bellingham, Wash., with Vibrant USA, an independent insurance agency that specializes in Medicare.
Part B premiums are $104.90 a month in 2013, so your monthly cost will be $104.90 plus 10% ($10.49) for every year missed, Williamson says. You missed seven years, so you'll pay an extra $73 -- about $178 a month in all.
The penalty: Part D
And then there's the question of drug coverage, Medicare Part D. Likewise, if you opt out now, the insurance will cost you more later. The penalty is 1% of the premium each month for every month you are eligible and don't enroll, says Williamson.
"After you join a Medicare drug plan, the plan will tell you if you owe a penalty, and what your premium will be, says Medicare.gov's explainer on Part D penalties.
One woman's story
Williamson sees firsthand the costs for people who want Medicare now after skipping coverage in their younger years. She tells the story of an elderly friend who decided not to get Medicare prescription drug coverage when it was first offered in 2006.
"This friend went on Medicare in 1992," Williamson says. "There was no drug plan then. Come 2006, she determined that, since she doesn't take drugs, 'Why would I spend the money?' She just refused to sign up for any drug plan."
Today the friend, who is 86, needs a daily prescription drug for a serious condition. She paid for it herself until the price rose to about $100 a month recently, Williamson says.
Finally, with the help of her caregivers, she signed up for a Medicare Part D prescription drug plan. The insurance reduced the cost of her medicine to "something like $3.65 for her drug -- very cheap," Williamson says.
The insurance premium is $28.80. But, because she waited to sign up, she also pays about $25 a month in penalties. That brings her total monthly premium, including the penalty, to about $53.
"The penalty can hurt you," says Williamson. "But there are a lot of people who say, 'Yeah, I’m paying a big penalty now but look at what I saved over the years by not having to pay.'"
Making the decision
She has other customers who don't use prescriptions but do buy Medicare prescription insurance as protection against what the future may bring. "Basically, they say, 'What's the cheapest drug plan out there?' Then they're not subject to the penalty and if they need it they have it."
In 2014, co-payments and deductibles are dropping, making Part D coverage cheaper. Read here about the improvements in Medicare drug coverage next year.
For personalized guidance on the costs and benefits, contact your State Health Insurance Assistance Program for free Medicare counseling, either by phone or face-to-face. Find your state's program here, at Medicare.gov, or by calling (800) MEDICARE.
The counselors also can help you decide whether to buy additional private insurance in the form of Medicare supplement (Medigap) plans or Medicare Advantage plans. These insurance plans pay Medicare's deductibles and co-pays.
If your income is low, you might qualify for what Medicare calls "Extra Help" paying your premiums. "In 2013, you may qualify if you have up to $17,235 in yearly income ($23,265 for a married couple) and up to $13,300 in resources ($26,580 for a married couple)," says Medicare.gov, which shows state resources for help, too. Or call Social Security at (800) 772-1213.
Opting in, opting out
Here, in a nutshell, are the Medicare plans and the penalties for opting out.
Part A: Hospital care
- Cost: Nothing (because you paid for it while you were working).
- Deductible: For 2013, the deductible is $1,184 ($1,216 in 2014) for any hospital stay 60 days or less. After 60 days there are co-pays:
- 61 to 90 days: $296 per day.
- 91 to 150 days: $592 per day (the limit is 60 of these high-deductible days in your lifetime).
- More than 150 days within a single benefit period: full cost.
- Can you opt out? No, but why would you? It's free.
- Cost: $104.90 a month, provided your income is below $85,000 for a single person, $170,000 if married and filing jointly. If your income is more, you'll pay more.
- Deductible: $147 per year. Once you've met that, however, you'll still have to pay 20% of the Medicare-approved amount. (See what's covered.)
- Can you opt out? Yes.
- Penalty for opting out: 10% per year for each year you skipped is added to your Part B premium.
Part D: Prescription drugs
- Cost: These are private plans, offered in conjunction with Medicare, and costs vary. (Medicare explains the costs here.)
- Deductible: It varies depending on the plan, but the maximum deductible allowable for 2013 is $325. In 2014, it drops to $310. (Find plans that cover your drugs.)
- Can you opt out? Yes.
- Penalty for opting out: A formula is used, based on how long you’ve been eligible and without coverage. Medicare explains how the penalties are calculated.
How do you deal with the deductibles and co-pays?
Does paying $592 per day for hospital stays over 90 days or 20% of doctor visits sound frightening? That's why there's such a thing as Medigap and Medicare Advantage plans. These plans fill the gaps left by basic Medicare coverage.
More on Money Talks News:
VIDEO ON MSN MONEY
Daaaaaa!!! Thus the Ponzi Scheme is born! More paying in than using the system.
Health Care is not the issue, we have plenty of folks that are out there doing Gods work everyday! Thank you for that by the way. We have always had good care! The problem is and has been and will always be the Insurance industry and the whole idea of insurance.
Ya know back in the day before all these so called Insurance companies really got a foot hold in our society, when a guy came calling to your door to sell you some kind of insurance that person was the first person you suspected in your demise come time to collect....
The Insurance industry was what needed fixing!!! He fixed nothing, he only secured the free market monopoly for the whole insurance industry... They win we loose!
"Can you opt out? No, but why would you? It's free."
And there's the sign that says this was written by a retarded liberal. (as if there were any other kind)
Here's some helpful info. "Free" means that you don't have to pay for it. We are all forced to pay for medicare whether we want to or not. This is the extreme opposite of free.
I just want to ask this one question about Social Security and Medicaid. My question is why is it considered an entitlement when we pay for it out of our own pockets? Of course we didn’t write the check every week we got paid to pay for this, but our employer who we work for had to take the money out of our paychecks to pay for this. And of course they matched what we paid. So why do they consider this an entitlement. This is the government, saying everything they do for us as an entitlement, even though we paid for. If that’s the case that Obama care must be an entitlement, because you’re paying for it, not the government. So therefore it’s an entitlement, am I correct or not? This is always concerned, me why the government gets away with this saying there giving you something. When the actually given you nothing I can’t follow their line of thinking is not logical.
Why would you want to opt out? That is exactly what the Government wants! My brother is an Otolaryngologist, and he thinks that MEDICARE is the best program for the elderly. Medicare is unlimited!!! Let me repeat that, Medicare is unlimited!!!!! Obama Care will have rationing. That is how all countries who have National Healthcare keep costs down.
My Dad has had 8 Cardioversion's and 2 Oblation's on Medicare. We will not let my folks opt out. Do you really think you will get unlimited cardiac treatments with The Affordable Care Act??? Don't be stupid people.
Wrong, wrong, wrong!! Medicare is NOT FREE to most Americans. For some with incomes of less than $730 (approx.) per month, it is free - and also it is free in some geographical areas.. BUT, most anyone who has an income that low is either a spouse with a mate's income, or is on some other kind of subsidy like food stamps, housing, and likely on MEDICAID. Medicare costs $99 per month and then if you want any kind of medication coverage, it is from $12.50 to $25 per month. Granted it is not nearly as expensive as my last insurance 2 years ago, it is NOT FREE.. Refer to "Medicare and You", 2014 version for more information. In addition, anyone who does not opt to take it when qualified faces a forever penalty of 10% premium for every year he did not sign up for it. Also, there are co-pays for services.
For most of us, you get better coverage with a supplemental plan. There are oodles of choices and plans. Some include eye care, dental care and have lower deductibles. I would encourage anyone who is facing the Medicare decision to talk with an insurance broker to find out what the options are, what the letters mean (A,B,D, etc) and what costs for insurance and out of pocket will be. This article, like many on MSN is poorly researched.
IMHO... Medicare, Medicaid, and Obamacare will all be replaced in the future with a single payer system. Unfortunately that will equate to higher taxes (MUCH HIGHER!).
The only way for a single payer system to work will be the government having all and total control of your health needs and all and total control of ALL aspects in the healthcare industry.
In other words socialized medicine!
What's in your wallet?
Part A: Hospital care
(because you paid for it while you were working).
Can you opt out? No, but why would you? It's free.
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