Posted on Friday, 22nd August 2014 by

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If you know of someone approaching age 65 or younger and signing up for Medicare send them a link to this article. It provides the information that federal employees and retirees need to consider before they sign up.

If you are already collecting Social Security benefits you will be automatically signed up for Medicare three months before your 65th birthday. You can opt out of Part B coverage if desired. For those who are not collecting Social Security at age 65, you have to apply either online or you can visit your local Social Security office. If you don’t sign up for Part B when first eligible you face a 10% penalty for each year you delay enrollment.

When you sign up for Medicare you have two options to consider. Medicare A (hospital insurance) doesn’t require a monthly premium for most because they paid Medicare taxes while employed. If you don’t receive Part A premium-free, you must pay up to $426 monthly. Thankfully federal employees pay Medicare tax so your hospital Part A does not require premiums when you retire and apply for benefits.

Part B (medical insurance) requires a monthly premium that is based on your Modified Adjusted Gross Income (MAGI). The standard premium for 2014 is $104.90 for individuals with an income of $85,000 or less or for a couple filing jointly earning $170,000 or less. There are five premium rates based on your income with the highest premium currently at $335.70 per month.

Signing up for Part A makes sense for most and OPM recommends you sign up because you already paid for this coverage while working through your Medicare taxes. Whether or not you take Part B medical coverage is up to the individual. Our FEHB plans continue to cover medical insurance even if you elect not to apply for Part B coverage. My article titled “What to Consider Before Enrolling in Medicare Part B” discusses your options and how your FEHB program works either way.

If you aren’t collecting Social Security you have a 7 month window starting three months before your 65th birthday to apply without a penalty. I decided to apply in the 7th month because I converted one of our retirement accounts to a ROTH two years ago. Part B Medicare premiums are based on your income and Social Security uses income from 2 years back to determine your Part B premium. When you convert to a ROTH the total amount of the conversion is included as income for that year. I thought that if I applied later in the year Social Security might have received my 2013 income information from the IRS to use for the Part B premium calculation. Another reason for waiting is that I won’t have to pay Part B premiums until November or December since it takes three months to process a Medicare application.

Signing up only for Medicare online at http://www.socialsecurity.gov was easy especially if you already have an online account set up. It took me about 20 minutes, only because I read several of their notices about the program first. I signed in and clicked on the “Help Center,” then clicked on “Apply For Medicare” to start a new application. If you are only applying for Medicare, and not for your Social Security benefits, you only fill out 3 blocks of data. They issue you a Re-Entry number in case you can’t complete the form in one sitting and you will receive a confirmation number as well to check the status of your application online.

You will receive a determination letter from Social Security concerning the status of your application and it will list your monthly part B premium. Since you are not currently collecting Social Security benefits, in this case, you will be billed every three months for your premiums. After you apply for Social Security benefits your premiums will be deducted from your monthly payment.

If your Part B premium was based on higher income from 2012 you can file a Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount – Life Cycle Changing Event Form) to reduce your Part B premiums. Basically, you have to take this form and a copy of your 2013 income tax return to your local Social Security office. If your income in 2013 is in a lower Part B payment bracket they will adjust your premium accordingly. Small business owners with decreasing current year revenue can also submit this same form with supporting documentation, such as previous year and year to date profit and loss statements, to support and justify a lower Part B premium.

The advantages for most FEHB participants is that your deductable, coinsurance, and copayments are waived by your plan when you sign up for Medicare A & B. If you only elect Part A (hospital coverage) Medicare will be your primary insurer for hospital care and your FEHB plan will remain primary for medical expenses. Another advantage for Part B participants is that you can go to any doctor that accepts Medicare. Blue Cross Blue Shield basic FEHB members are limited to doctors within their provider network. However, if you have to go to an out-of-network provider that accepts Medicare, Medicare will cover the visit. In this case, Blue Cross Blue Shield will not cover any of the coinsurance or copayment since you went out of network.

The following resources provide links to the four part series I wrote about Medicare enrollment last year. If you know of anyone approaching 65 send them a link to this article to help them make informed benefit decisions.

Additional Resources:

Next on my agenda is to file for Social Security benefits at age 66 next year. I’m not sure if I’ll file or file and suspend just so my wife can collect my higher spousal benefit. If I file and suspend my benefit will increase about 8% a year until I start collecting, possibly at age 70.

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