POST WRITTEN BY
Gregory Gurbikian Oct 10, 2019,
08:00am
President/CEO at Healthcare Solutions Direct, LLC, a
nationwide insurance agency focused primarily on the retiree health market
When thinking about Medicare, two numbers
really stand out. The first number is 10,000 — that is
how many people per day are turning 65 and becoming eligible for Medicare. That
is a big number and is predicted to rise in the next decade. The other number
is 79 — that is the percent of future retirees who incorrectly think Medicare
is free, according to a recent Nationwide survey. After talking to
thousands of Medicare-eligible individuals in my 10 years of healthcare
insurance experience, I have concluded this misconception is not entirely the
person’s fault.
Traditional Medicare is comprised of two
parts: Part A for hospital expenses and Part B for medical expenses. According
to Medicare’s guidelines, most individuals will not pay
anything for the Part A hospital coverage, but there will be a charge for the
Part B medical coverage. In 2019, the average person who is eligible for
Medicare will pay $135.50 a month for the Part B medical
side. So why do many people believe Medicare is free? In my experience, there
are three reasons for the misconception:
1. Retirees often think Medicare is free
because they have paid into Medicare their entire life through payroll taxes.
Almost all forms of compensation are subject to Medicare tax. Currently, 1.45%
of an employee’s wages is deducted for Medicare, and their employer contributes
and matches another 1.45%.
For example, if someone earns $1,000 per week,
$14.50 ($1,000 x 0.0145) would be withheld, and their employer would match that
with another $14.50. The total going toward Medicare tax in this example would
be $29. Self-employed individuals are responsible for the entire 2.9%
contribution. If a person works for 40 years or more, that is a lot of money
contributed to Medicare. Why, then, would someone have to pay for Medicare when
they retire? The answer is because medical costs have skyrocketed due to
advances in technology, and drugs and services being administered in an
outpatient setting.
2. The second reason for the misconception is
because unless you are drawing Social Security before turning 65, you will not
receive a notice about Medicare. The reason for this is Social Security does
not have any means to withhold the Part B charge from someone who is not
collecting their retirement. An individual can start drawing Social Security at
62 but will be penalized for taking it early since the full retirement age for
those born between 1943 and 1954 is 66. The Centers for Medicare and Medicaid
Services has discussed in the past about sending a notice to everyone turning
65 letting them know about their Medicare rights. This would greatly help
retirees understand the cost of Medicare. However, with 10,000 people turning
65 each day, the costs of doing so would be a big undertaking for the federal
government.
3. The third reason so many people think
Medicare is free is due to the prevalence of marketing and sales of Medicare
Advantage plans. These alternative plans to Medicare cover hospital, medical
and usually prescription with little if any premiums and are sold by private
insurance companies. These plans do not supplement Medicare but can be an
option for reducing out-of-pocket exposure for people who can’t afford a
Medicare Supplement or don’t qualify for one because of health conditions
outside a guaranteed issue period.
Since an individual who chooses one of these
plans will no longer receive their healthcare coverage from Medicare but rather
through a private insurance company, they often believe they are not
responsible for the Part B charge. However, once an individual is Medicare
eligible, regardless of how they decide to receive their healthcare coverage,
they are always responsible for the Medicare Part B charge. Unfortunately,
advertising and marketing of these plans can lead retirees to think Medicare
can be free.
It’s easy to see why so many retirees think
Medicare is free when they are eligible. And this misconception can make
retirement a lot more stressful for someone who has not planned for this. Most
states, though, have programs that offer extra help for retirees who can’t
afford their Medicare premiums. I would strongly recommend retirees discuss
their options with an expert who can simplify the process from start to finish. Although Medicare has costs, it is much cheaper than
other forms of health insurance. The federal government has worked hard to make
Medicare affordable — it’s just not free.
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