Navigating Medicare’s Maze

It’s amazing how many people think that Medicare is free. It is anything but: You must pay premiums for part of it, and it does not cover everything. Make sure you avoid some traps signing up for this health-care plan for older Americans.

Here are the broad outlines. The program’s website,, has a lot more details.

When you reach age 65, you are eligible for Medicare. You have a window of three months before the 65thbirthday and four months afterwards to sign up. The last thing you want to do is miss this window because it could lead to significant premium penalties that last forever.

Even if you haven’t started Social Security, you are eligible for Medicare at 65. Those born before 1955 can start receiving Social Security payments, although you can collect at 62 but receive lower benefits.

If you aren’t on Social Security, then you will have to make premium payments from your own pocket. Part A (hospital) is free, while Part B (for doctors) and Part D (for prescriptions) require premium payments.

Depending upon your income level, the premium payments for Part B could go as high as $300 per month. Even if you are on Medicare, there are some pretty big deductibles, so many people purchase a Medicare supplement, known as Medigap. Private insurers sell such add-on policies. Medigap has 10 different versions, named for alphabetical letters A through F, offering different premium levels and benefits. Plan F is the most comprehensive.

Another wrinkle is Medicare Advantage, which private insurers also provide. It offers all Medicare services, even drugs, and often costs less. One difference is that it has a smaller network of doctors.

By the time all is said and done, it could cost as much as $16,000 or $17,000 annually for a married couple for Medicare coverage and a supplement, if their income is high enough.

For those who choose to continue to work after turning 65, you can apply for Medicare if you choose to or you can continue on your employer’s plan. In any event, you should still apply for Medicare Part A, as it is free and will become the primary payer in the event of a hospital admission if the group plan has less than 20 people.

The employer’s plan will provide secondary coverage just like the supplemental policy. The employer’s insurance will continue to be primary coverage for physicians, tests, prescriptions, etc. But if you do stay on your employer’s plan, you need to be very careful when you eventually come off of it that you don’t get caught in a trap.

If the group plan has 20 participants or more, than just the opposite occurs.

Once you separate from your employer, you have eight months in which to enroll into Medicare Part B and Part D. If you don’t do it in that time, you must wait until Jan. 1 of the following year to enroll and it must be done by March 31. Even then, the coverage doesn’t begin until July 1 of the same year.

Thus, there could be a significant period without coverage. Worse still, you may end up having to pay a penalty of 10% per year for each year that you didn’t sign up, and this penalty lasts forever. We strongly urge anyone who is approaching age 65 to visit with a specialist in this area.

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V. Raymond Ferrara, CFP, CSA, is president and chief executive of ProVise Management Group LLC in Clearwater, Fla. 

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