Retirees Returning to Work Should Heed Medicare Rules

back

Want to support Global Action on Aging?

Click below:

Thanks!

Retirees Returning to Work Should Heed Medicare Rules

By KELLY GREENE, THE WALL STREET JOURNAL

January 12, 2003

If stock losses have sent you back to work, it's important to understand how your paycheck could affect your Medicare benefits.

The economy is taking a toll on older adults and their finances: About one in five older Americans who lost money in the stock market during the past two years has put off retirement, and 10% of those already retired are at work again, according to a study that AARP released last month.

The changes are creating confusion among older workers, some of whom fear quite correctly that they could endanger their Social Security or Medicare benefits. "That's a really popular line of questioning we're getting right now," says Deane Beebe, spokeswoman for the Medicare Rights Center, a nonprofit New York group that helps older adults navigate Medicare matters. (It can be reached at 212-869-3850 or www.medicarerights.org.)

Let's start with Medicare, the federal health-benefits program for the elderly and disabled. In short, it kicks in when you turn 65, unlike Social Security, which we'll get to next week. It has two components: Medicare Part A, basically hospital insurance you get free, and Medicare Part B, which provides more medical coverage and costs $58.70 a month. (That amount typically is deducted from your Social Security benefits; otherwise, Uncle Sam sends you a quarterly bill.)

So what happens if you have a job that already provides health insurance and you decide to keep working after your 65th birthday? It depends on the size of your employer.

If your company has 20 or more workers, your employee health insurance (assuming it's offered) remains the "primary" payer of your health benefits, meaning that it pays first. In this case you can delay enrolling in Medicare without a penalty, saving $704.40 a year.

But you may still want to enroll in Medicare as a backup plan if you expect to have sizable medical expenses that aren't covered by your company. Talk to your human-resources department, and review past medical bills, to decide whether the extra cost is worth it. By the way, if you start a job after turning 65, the same rule applies; if the company has 20 or more employees and provides their health insurance, management has to offer insurance to you as well. A company can't discriminate against you simply because you would otherwise qualify for Medicare.

But if you work for a small employer, watch out. Sign up for Medicare as soon as you can, or it could cost you later on. If your workplace has fewer than 20 workers, Medicare becomes your primary insurance, and any work-sponsored insurance is secondary.

Even if you have adequate coverage through your employer now, waiting to sign up could force you to face an awkward coverage gap when you finally do retire.

How so? Late entry to Medicare is limited to January through March of each year, and doesn't take effect until the following July.

Even worse, you'll pay a 10% penalty in Part B premiums for each year you delay enrollment. Example: If you enroll in Medicare this year after waiting three years, your monthly Part B premium would be $76.31, 30% higher than the $58.70 you'd have paid otherwise.