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If I have a tight budget and good health, what kind of Medicare should I get?

Editor’s Note: Journalist Philip Moeller is here to provide the answers you need on aging and retirement. His weekly column, “Ask Phil,” aims to help older Americans and their families by answering their health care and financial questions. Phil is the author of the new book, “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil; and he will answer as many as he can.

Annette – Calif.: I just turned 64. In the fall I plan to move to San Francisco to be closer to my kids and to be a nanny to my daughters’ baby. I now live in Orange County, Calif., and have an HMO currently, and am very happy with this plan. But I don’t need it very much. I am very healthy and on only one medication. Of course, I don’t know what the future will bring. I have seen articles that say if you are healthy, a Medicare Advantage (MA) plan may make sense. I am single and will be on a fixed income once I retire. How do you feel about MA plans versus original Medicare with a Medigap supplement policy? I have read that if you get sick on an HMO, it can end up costing you the maximum amount, which is around $6,000 per year. I am still not quite sure how that can be since I thought HMOs pay for everything.

Phil Moeller: No insurance pays for everything.

Medicare Advantage plans are less expensive than a package of original Medicare with a Medigap supplement plan, and often cover additional things that basic Medicare does not cover, with limited dental-vision-hearing being the most significant.

Medigap plans pay for things that basic Medicare does not fully pay for, but they generally do not cover anything that is not also covered in basic Medicare. The major exception is that some Medigap plans cover emergency medical care outside the U.S.

You could simply get Parts A and B — which are together known as original Medicare — and not get either an MA plan or a Medigap plan. Part B of Medicare, however, only pays 80 percent of covered expenses, so you are at risk of some big uninsured bills if you were to have a serious health issue.

If you decided not to get a Medigap plan when you first became eligible for Medicare, you might find it difficult to later get such a plan. California consumer-protection rules would come into play here, because Medigap insurance plans are regulated at the state level.

Regardless of which way you went, you’d also need a Part D prescription drug insurance plan.

The possible downside to MA plans is that they usually require you to limit your care to only those doctors and hospitals in the plan’s provider network. If you like those caregivers, great; if not, you might not like an MA plan.

In the case of serious illnesses or disease, some research has found that enrollees tend to leave MA plans in favor of original Medicare, which provides greater access to specialized physicians and hospitals. There also have been complaints that MA plans are more likely to limit coverage for seriously ill patients than is original Medicare.

If I was on a tight budget and in great health, I’d get a cost-effective MA plan with a Part D plan bundled into it. I would try to use some or all of the savings from this plan to build up a health care contingency fund. Then, if I had a serious illness, I would be able to handle higher out-of-network expenses and consider switching out of my MA plan during Medicare’s annual open enrollment period, which runs each year from Oct. 15 through Dec. 7.

I understand that this reply may raise some additional questions. That’s why I wrote an entire book about Medicare!

Andy – Calif.: I am 60 years old and plan to retire in four to six years. My wife is 25 years younger than I, and we have a 2-year-old son (he is not disabled). What are the limitations to our collecting benefits for our son from Social Security beyond the family maximum when I retire? Which one of us should file for the benefits at the time I retire? It is my understanding I can get only one benefit, is that true in this case? Or would they both together be considered one benefit?

Phil Moeller: This can be a tough call.

First, unless your wife and your son are both claiming benefits on your earnings record at the same time, the family maximum benefit should not come into play. And given her age, your son will be too old to claim benefits by the time she is old enough to claim them.

Your son will get the maximum years of child benefits if you file for your own benefits at age 62. However, you will be leaving a lot of money on the table by filing early. Benefits rise from age 62 to 70 by about 7-8 percent a year. Further, by locking in a reduced benefit, you would also be reducing the size of your wife’s survivor benefit should you predecease her (and the odds favor this being the case).

So, were it me, I’d wait to file until age 70 and settle for only five or six years of child benefits. But of course, I don’t know any of the details about your financial situation or your wife’s potential benefits on her own record. If she makes a nice income, it’s possible she would never need to file a claim for a survivor benefit.

Perry – Ill.: If I file a restricted application to take the spousal benefit from my wife’s Social Security, will Medicare payments be taken from the spousal benefit I receive? If so, is the “hold harmless” rule even relevant to me because it’s not my Social Security, it’s the spousal benefit?

Phil Moeller: Let’s provide some background. The hold harmless rule is intended to prevent a person’s Social Security benefits from declining from one year to the next. This otherwise would happen if annual increases in Medicare Part B premium are larger than annual cost of living increases in Social Security.

The hold harmless rule, which has created a lot of confusion and consternation, applies to any Social Security payment – retirement, spousal, survivor, etc. — from which Medicare premiums are deducted. Remember that Part B premiums must, by law, be deducted from a person’s Social Security payments if the person has claimed a benefit.

A person who applies for Medicare cannot be held harmless in the year they get Medicare, only in subsequent years. The standard Part B premium was $134 a month last year and is unchanged this year. So, if it matters, I don’t think the hold harmless rule will be a very big factor in future years.

A Medicare enrollee who has not yet claimed Social Security benefits would pay Part B premiums directly to Medicare every three months. People who pay their premiums directly to Medicare are not held harmless from future Part B increases.

Applying for Social Security benefits will never increase your Part B premiums, and could protect you from future increases should rates of inflation again fall to near zero and result in cost of living adjustments in Social Security that are too small to cover annual increases in Part B premiums.

Angela – N.J.: My grammy is 98 and with it mentally, but struggling physically. She is at a care center now recovering from a fall. She is truly amazing and pretty much recovered and wants to go home. We know she needs 24-hour care if she goes home. Her falls are becoming more frequent, she is not able to dress herself or go to the bathroom alone and the family is not able to be there 24/7. What kind of assistance would she qualify for?

Phil Moeller: Big props for your grammy!

Unfortunately, Medicare does not cover the kind of custodial care you describe. It only covers what’s called medically necessary care.

The only insurance sources for custodial care are private long-term care insurance and, for those with nearly no income or financial assets, Medicaid.

Medicaid eligibility is determined at the state level. The State Health Insurance Assistance Program (SHIP) provides free counseling; I suggest you contact a local office and see if someone there can help you determine if she qualifies for Medicaid.

I’m sorry I don’t have better news. The lack of affordable long-term care is a well-known crisis that is happening in plain sight. Expanding some form of Medicaid to provide such care to people who aren’t poor is the most logical way to get from “here” to “there.” But it’s a non-starter these days in Washington.

Terry: I will be 65 in August 2018 and my wife will be 66 in December 2018. I plan to retire after reaching 65; my wife is unemployed but has her own benefits waiting for her. I know she can file for spousal benefits when I file at my full retirement age. If she were to file now for her benefits, knowing they will be reduced some, and then file for spousal when I am 66, would her early filing decision affect the eventual spousal benefits? Also, since I am working, will the benefits she receives now be taxed as ordinary income?

Phil Moeller: Yes, filing early reduces not only her retirement benefits but also her prospective spousal benefits. Here’s another route you may wish to consider.

If your wife files for a spousal benefit prior to reaching her full retirement age (FRA), she must also file simultaneously for her own retirement benefit. Both will be subject to early claiming reductions and she will only be able to collect an amount that is roughly equal to the larger of the two benefits.

However, because she turned 62 before the beginning of 2016, she is grandfathered under the 2015 changes to Social Security rules. This enables her to file a restricted application for only her spousal benefit when she reaches full retirement age (assuming you have filed earlier for your own benefits) and defer her own retirement filing until she turns 70.

Absent financial and health concerns specific to your situation, waiting until FRA is the best strategy for her.

Up to 85 percent of her Social Security benefits are subject to federal income taxation, regardless of whether you are working or not. However, your work income, when added to her taxable benefits, may place you in a higher tax bracket if you file a joint return.

Lastly, if she files for any benefits prior to her full retirement age, and she has other earnings, her benefits will be temporarily reduced or even eliminated by Social Security’s earnings test.

Sherry – Calif.: My mother and father were both covered on my father’s insurance and they also signed up for Medicare. My father has passed. I kept Mom on dad’s insurance. It is a Cadillac plan I am told. I have confirmed that it will pay 100 percent with no limitations on time for skilled nursing. My question is whether she is required by law or does she even need to carry Medicare along with a private plan?

Phil Moeller: It sounds like your dad had one of those terrific retirement packages that simply don’t exist anymore. The short answer to your question is that I don’t know. You should call his plan and make sure it has no requirement that she have Medicare. If it truly will cover all her health insurance needs for the rest of her life, then there is no need for her to ever get Medicare and no law that says she must.

Candace – N.Y.: I stopped working last May, when my employer provided me COBRA coverage for 18 months. Now, I come to find that I needed to apply for Medicare eight months after I stopped. Why, if I am covered, do I have to take Medicare Part B? It will cost me so much money. This is so insane, as Medicare would not have to pay anything for another 10 months, but are they forcing me to do this.

Phil Moeller: Unfortunately, COBRA is not considered active employer coverage in the eyes of Medicare. As a result, COBRA policies usually stop providing primary coverage to people who are eligible for Medicare. So, while you think you are still covered by COBRA, that may not be the case.

Whether these rules make sense or “are fair” is another matter, of course, but your first action should be to get Medicare ASAP.

I’m sorry that you’ve been caught in one of Medicare’s unfortunate “gotcha” situations. If it helps, I hear from many others who also have this problem.