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My meds are cheap. Do I really need a Medicare Part D drug plan?

Editor’s Note: Journalist Philip Moeller, who writes widely on aging and retirement, is here to provide the answers you need. 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.

Bill: I am relatively healthy and on a $4 per month blood pressure medication. I have decided on traditional Medicare plus a Medigap letter plan N. I’d also sign up for an inexpensive Part D drug plan except my income is high enough to trigger Medicare’s high-income surcharge. So I plan on skipping Part D. If I develop a need for hugely expensive meds, then I’d immediately sign up for a 5-star rated drug plan and then pay the late-enrollment penalty. Do you see any problem with this? I am a retired physician.

Phil Moeller: This is a clever work-around, although I am not a fan of gaming the system, and I see your strategy as doing just that. The late-enrollment penalty for Part D would tack on 1 percent to your Part D premium for each month you’re late in enrolling. The average Part D premium is less than $40 a month, and many plans charge less. So doing a little math, even signing up five years late would boost that hypothetical premium by 60 percent, costing you an extra $24 a month for the rest of your life.

READ MORE: Here’s how to find the Medicare Part D drug plan right for you

Assuming you would have been paying high-income surcharges for the entire five years, that’s 60 months at $34 a month. So it would take you about seven years — 12 years from now — before your penalties equal your savings. And this rough calculation ignores the reality that a dollar saved today is worth more than a dollar spent in the future.

The biggest problem I see with your strategy is the potential delay in the effective date of the Part D plan you’d wind up selecting. This enrollment process is not like going to Starbucks for a latte. There may be coverage delays, and you might have to foot the full cost of these drugs for up to a couple of months.

To be safe, I would identify one or more 5-star plans offered where you live. There aren’t a lot of 5-star plans yet, so you need to do this anyway and make sure you can even get one. Assuming you can, I’d call the plan and ask them how long the gap can be between when you applied and when your coverage was effective.

I would lecture you about avoiding lifetime late-enrollment penalties, but you have already factored these into your strategy.

James – Va.: I do not yet receive Social Security, so my Part B premiums for Medicare have been increasing. Will my premiums decrease when I begin Social Security, or will they stay the same and continue to be different and out of sync with those who have been receiving Social Security and have had no increases?

Phil Moeller: Your premiums will not necessarily decrease when you begin Social Security. What will happen is that you will become subject to the program’s “hold harmless” rules. The exception is that people with high incomes who are subject to surcharges are not held harmless. If you are in the hold harmless group, you would not be subject to the kinds of increases you’ve experienced in the past two years.

READ MORE: How plans to repeal the Affordable Care Act could affect Medicare

But in order for your premiums to actually decline, future increases in Social Security’s annual cost of living adjustment would have to be large enough for the program to raise premiums on the people who were held harmless in 2016 and 2017. As their premiums go up again, yours might go down. I say “might” because Medicare costs will continue to increase, requiring the agency to raise premiums. So it’s possible any downward adjustments to which you’re entitled could be exceeded by annual premium increases. Is your head spinning yet?

Program rules envision everyone (except high-income beneficiaries) eventually paying the same Medicare premiums. But no one knows whether this will happen in one year or take several years. It all depends on future rates of inflation.

And, of course, Congress could step in and change these rules. No one is very happy with the unforeseen consequences of the hold harmless rule. I wouldn’t be surprised if changes were proposed, although opening up either Medicare or Social Security to even a modest rule change risks a much broader debate that defenders of both programs aren’t eager to have at this time.

Qa: My wife has been getting Medicare since she turned age 65 last year and receiving Medicare under her own Social Security number. She recently signed up for a spousal benefit on my record and recently got a letter confirming this benefit.

Although she submitted her spousal benefit request under her own Social Security number, we noted that the Social Security number on the award letter was mine, not hers, and the award letter mentioned that she would be getting a new Medicare card. When it arrived, it also had my Social Security number on it. Is this because she’s getting the spousal benefit under my account? Does this affect either of our benefits in any way?

READ MORE: Column: Social Security needs to be reformed, not have its funding cut

Also, since she plans to defer filing for her own benefit until age 70, what happens then? Will she have to contact Medicare then to “get back” her own Social Security number?

Phil Moeller: This change in Medicare numbers occurs when a person with a Medicare number begins claiming Social Security benefits based on the earnings record of another person. It is not supposed to affect either party’s Social Security or Medicare benefits in any way.

However, I have heard from multiple people that there have been adverse effects involving a person’s subsequent Medicare coverage. In one case, a person’s private Medicare Advantage insurer dropped them from coverage, because her Medicare number had changed and no longer appeared in their records as being a plan member. They were able to fix the problem, but it took a long time and was very stressful.

Here is what a Social Security spokeswoman has to say about this situation:

This change occurs when a Medicare-only entitlement on a SSN [Social Security Number] converts to a monthly benefit entitlement on a different SSN. However, the start date of entitlement to the Medicare coverage on the old record does not change when it converts to the new SSN. Additionally, a new health insurance card is issued when an individual status changes.

My recommendation is that your wife confirm with Medicare and any private Medicare insurers that her plan status is unchanged by this number change.

When she later files for her own Social Security benefit, her filing status should change again, and she should be issued a new Medicare card with her Social Security number. Again, however, I would be reluctant to take this for granted and would contact Social Security to confirm that this is the case. Social Security, by the way, is in charge of issuing new Medicare cards.

John – N.Y.: I am 69 years old. I am retired. I live in New York City. I have Medicare Parts A and B, a Medigap letter N policy and a Part D drug plan. My wife is 58. She has health insurance through her employer.

We are hoping to pack up within the next year and move to Amsterdam, Netherlands for the next year or so in order to travel in Europe. We plan to return to the United States when we have satisfied our travel lust, but are not sure whether we will return to New York or look to live somewhere else where the weather is warmer.

READ MORE: I’m retiring abroad. What Medicare plan should I get?

I am aware that Medicare does not cover medical care outside of the United States. My wife and I are planning to purchase health care coverage in the Netherlands to cover our stay there (and hopefully if we need care in any other country while travelling).

My concern is that it is my understanding (or impression) that if I drop out of Medicare while we are living abroad, I will run into hurdles in trying to re-enroll in Medicare upon our return to the U.S., including waiting periods, increased costs and exclusion of pre-existing conditions. I have hypertension and a history of prostate cancer.

I am considering keeping my Medicare coverage intact while we are abroad in order to avoid any of these problems upon our return. This would, of course, make it necessary for me to pay for two different coverages while we are abroad. I would appreciate any thoughts and suggestions you can offer.

Phil Moeller: Your concerns are well-founded. If you stop your Medicare coverage when you are out of the country, you are exposing yourself to late-enrollment penalties for Parts B and D when you reacquire Medicare coverage upon your return.

Also, it is possible that getting a new Medigap Plan N would be much more expensive. Once you’ve left your initial enrollment period for Medigap, insurers may be able to charge you higher rates based on your health or may even refuse coverage altogether. Medigap is a state-regulated product, so you should see if the state of New York has any safeguards that might help you out. And if you did relocate to another state, you would need to check its Medigap rules.

I am curious, however, about whether you might qualify to be covered by your wife’s employer group policy? If you are, perhaps you could switch to her policy and end your Medicare plans? Doing do could permit you to start over fresh when you rejoin Medicare — no late-enrollment penalties and no adverse Medigap underwriting.

This only works if your wife somehow can keep her employer policy while the two of you are traveling. If not, you would need to re-enroll in Medicare when her employer coverage ends. And you might be right back where you are now — facing re-entry problems if you don’t have Medicare coverage while you’re outside the country.

If you did move onto your wife’s policy, you’d have an eight-month special enrollment period that begins when her group coverage ends. If you took most of this period before re-enrolling, you could re-enroll while you’re in Europe (you’d probably need to maintain a U.S. address), and you could avoid Medicare premiums for much of your travel period.

I would not make these moves without discussing them fully with your wife’s employee benefits office and with Medicare. Most likely, I would play it safe and just pay to keep my current Medicare coverage. For a longer discussion of Medicare issues for people living outside the U.S., see this Ask Phil column.

Roger: I will turn 65 in two months. I get health insurance through my job and plan to work until I hit 70. My company only has 17 employees. Am I going to get hit with the 10 percent Part B late-enrollment penalty even though I want to keep my employer insurance through my company? By the way, my boss is 68 and has our insurance instead of Part B.

Phil Moeller: Roger’s question involves the 20-employee cut-off point for determining whether you’re on a small or large employer health plan. If you have a small-employer group plan, the Medicare rules say that when you turn 65 that you need BOTH — Medicare and your employer plan. Medicare becomes the primary payer of covered claims, and your employer plan becomes the secondary payer.

Column: What can we do to protect Medicare and Social Security?

So if your boss is keeping his employer plan, he also should be getting Medicare. If he does not need Medicare, the only reason I can think of is that your insurance is part of a larger group policy. Sometimes, smaller employers participate in affinity programs (say, through a trade group or local chamber of commerce) that allows their plan to be regulated as a large-employer plan. If this is the case, then you would not need Medicare at 65 and can simply use your existing coverage.

James: I am 66 years old and have an opportunity to participate in a health savings account (HSA), with the employer kicking in $1,300 of contributions per year. I am a low-wage earner, so I do not contemplate making my own contributions for the tax benefits. In order to participate, I was informed by Social Security that I could withdraw from Medicare Part A (one time only) using SSA Form No. 521. I am not enrolled in Part B, have never used Medicare services and am not drawing Social Security benefits. My medical plan covers 80 percent of hospitalization after a $3,000 deductible is met. My question is this: Would I be better off sticking with Part A as secondary payer in the event of hospitalization or putting $1,300 in savings? (I understand that Part A participants cannot have an HSA.)

Phil Moeller: That’s a terrific question and one that you are as well positioned to answer as me.

I don’t know the condition of your health and how likely you are to be hospitalized for a medical procedure. Given that even a brief hospital stay can cost more than $100,000, I’d weigh my exposure versus that $1,300 annual savings. Perhaps your employee benefits office can help quantify a worst-case situation for you so you can put a price tag on the value of keeping Part A.

For me, the $1,300 savings is a small gain versus the exposure of a big hospital bill. But as a low earner, I appreciate that being able to get that $1,300 and spend it on medical care would be attractive.

It’s a trade-off and, as earlier noted, one that you are the only true “expert” in evaluating.