You’re not retiring. Is joining Medicare Part A worthwhile?

Editor’s Note: Journalist Philip Moeller, who writes widely on health and retirement, is here to provide the Medicare answers you need in “Ask Phil, the Medicare Maven.” Send your questions to Phil.

Medicare rules and private insurance plans can affect people differently depending on where they live. To make sure the answers here are as accurate as possible, Phil is working with the State Health Insurance Assistance Program (SHIP) and the Medicare Rights Center (MRC).

Greg – Kan.: I am about to turn 65. I work for a state university in Kansas with a good group health plan. I don’t plan to retire. I spoke with our benefits office and with Social Security. The only benefit to signing up for Medicare Part A appears to be that it could pay part of a deductible for a hospital stay. Here’s my question: How high does my employer’s deductible need to be to make joining Medicare Part A worthwhile?  How do I make the appropriate cost-benefit calculation?

Phil Moeller: It’s not clear from your question whether you do or do not pay Social Security payroll taxes for your job. However, in either case, there’s really no cost-benefit analysis required.

If you are not qualified to someday claim Social Security benefits, it means you would need to pay Part A premiums. Thus, the key number here is not the annual Part A deductible, but the steep premium for Part A, which is likely to be $407 a month. For this price, there is no way Part A makes sense for you.

If, on the other hand, you qualify for Social Security benefits, you should probably take them. The rule to qualify is that you need to have at least 40 credits of covered work at jobs where you paid Social Security payroll taxes. Most people think this means they need to work for at least 40 quarters or the equivalent of 10 years at such jobs. Nope. It means you need to earn a certain amount each year in such a job to claim credits. These amounts change each year; they total $1,220 per credit in 2015. So if you earned $4,880 in a single month, for example, you’d already have earned the annual maximum of four credits that contribute to your Social Security eligibility. (Hey, no extra charge for this Social Security trivia. How could I let the opportunity pass? Along with co-authors and Making Sen$e contributors Larry Kotlikoff and Paul Solman, we actually did write the book on Social Security.)

Greg, if you have the requisite 40 credits, you will get Part A for free. Unless you have a high-deductible health care plan at work and make tax-deductible contributions to a Health Savings Account, I know of no cost-benefit analysis for Part A benefits. Take them. Here’s a detailed look at Part A benefits and that health savings account gotcha. Further, beyond the annual deductible, Part A might pay some other hospital expenses that are not fully covered by your employer plan. Check with your benefits department to see if Part A is a so-called “secondary” payer to your health plan.

Jafar – Fla.: My mother-in-law was born outside the U.S. but recently became a U.S. citizen after living here legally for several years. She has not worked in the U.S. and so is not eligible for Medicare. Her husband worked for less than 2 years only in the U.S. She is now 68. Can you please educate us about the options available to her? Is she eligible for Medicare, if so how do we obtain it?

Phil Moeller: If they have lived in the U.S. continuously for the past five years, every U.S. citizen or legal resident is eligible for Medicare when they turn 65 or become disabled. The relevance of working at jobs where Social Security payroll taxes are paid is, as was explained to Greg in the above answer, whether Part A insurance is free or not. In your mother-in-law’s case, neither she nor her husband qualify, so Part A will not be free, and would cost her $407 a month in 2015. This is a big hit for many seniors, and if your mother-in-law does not earn much money, there are several Medicare Savings Programs that might help her with payments for various Medicare expenses.

You can find out more and apply directly to Medicare by calling 1-800-MEDICARE (1-800-633-4227). However, before you do, you should be aware that your mother-in-law could be facing a slew of late-enrollment penalties, because she is 68 and it’s been more than three years since she turned 65. If, like most Medicare beneficiaries, she winds up getting Original Medicare (parts A and B) and a Part D drug plan, she may face penalties in all three programs. If she wants a Medicare Advantage plan, there could be a fourth penalty. The key metric is how old she was when she had lived here for five consecutive years, and thus was qualified for Medicare. I’d suggest you call a SHIP counselor in Florida or the Medicare Rights Center and discuss the possible sizes of these penalties and whether she has any grounds to avoid them or seek some relief.

It’s also possible that she could avoid Medicare altogether and instead get health insurance through HealthChoices Florida. People who sign up for Medicare generally lose access to the substantial financial subsidies available on the state exchanges created by the Affordable Care Act. But what many people do not know is that they are still able to keep an exchange plan. Usually, the loss of ACA subsidies means that a person’s premiums would rise so far in excess of what they would pay for Medicare as to make staying with the exchange a really bad idea. However, because your mother-in-law does not qualify for free Part A, it just might make financial sense for you to seek an exchange plan to cover her. Doing so might also avoid those nasty Medicare late-enrollment penalties. I’d call Florida Health Choices to inquire about this and then follow-up with SHIP or the Medicare Rights Center if you still have questions.

Margaret – Ind.: I turn 65 in October of 2015. I plan to at least work through age 67. I have health insurance while I “work.” I plan to not begin taking Social Security until I turn 70. Do I pay for Medicare part B until age 70 and request paying taxes on Medicare benefits?

Phil Moeller: Margaret, you do not own taxes on your Medicare benefits so let’s take that issue off the table right away. When you stop working at age 67, you probably will need to enroll in Medicare and begin paying whatever premiums are required by the health plans you wind up choosing (i.e. Original Medicare for Parts A and B, Medigap or Medicare Advantage, and Part D drug coverage). Because you won’t at that time be taking Social Security for another three years, you will need to pay your Part B premiums directly to Medicare.

However, there’s a slim chance your current employer plan will require you to have Medicare when you turn 65. If your employer has more than 20 workers, the odds are you will not need to get Medicare until you actually stop working. However, you should check now just to make sure. You also should ask your employer’s benefit department if you will have any kind of retiree health plan when you stop working at age 67. Such plans require Medicare to be the first or primary payer, with the plans becoming the secondary payer to help pay for that portion of insured health expenses that are not paid by Medicare.

Paula – Va.: If Medicare Part A is supposed to be “free,” why is the government deducting $200 per month for my Medicare? It is my primary insurance.

Phil Moeller: I need to know more to give you a definitive answer. But, if the deductions are coming out of your monthly Social Security payments, my guess is that they are for your monthly Part B premiums. While Part A is free to people who qualify for Social Security benefits, Part B is not. (A quick primer: Part A covers hospital expenses; Part B covers doctors, medical equipment and outpatient services.) The basic Part B monthly premium is $104.90 in 2015 but can be larger for higher-income earners. One of these higher brackets, for example, dictates a monthly Part B premium of $209.80. Perhaps this is what you are paying? If not, you should contact Social Security, which handles Part B premiums and the deduction of premiums from monthly Social Security benefit payments.

Laurine – N.M.: To whom can I dispute an unfair decision by Medicare? Upon retirement, I moved to Mexico — to live a more affordable life with dignity, not to lie on a beach in some resort. I didn’t sign up for Part B since one cannot use Medicare in Mexico. I had little income, and couldn’t afford to pay the premium for something that was of no use to me. When I returned to the states seven years later, Social Security slapped on a penalty for each year I hadn’t paid the premium. Unfortunately, my retirement and Social Security benefits place my income level just barely above the acceptable level in New Mexico to have the premium forgiven. To be able to pay the Part B premium plus the penalty I would have to, at age 71, find employment.

Phil Moeller: Laurine’s restatement of Medicare’s punitive rules for people who live overseas without Medicare and then come back to this country is accurate. I sympathize with her and all like her who are only seeking a decent life during their retirement years. Unfortunately, the way things stand now, I don’t have great advice for her or any high hopes that she can get the agency to cancel these late-enrollment penalties. I’d suggest she call her local SHIP office and see whether she has any recourse. Also, while her income by New Mexico standards may be too high to grant her relief from these penalties, perhaps there is one or more Medicare Savings Programs that she can use. It’s at least worth a call. I wish I had a better answer here. It’s way past time to reconsider the way Medicare rules work — or rather don’t work — with people who live or travel overseas. What might have made sense in 1965 when Medicare was created, does not make sense in 2015. Further, as more and more financially strapped Americans turn 65, Medicare’s late-enrollment penalties will take a bigger and bigger bite on unsuspecting seniors who don’t know the rules and can’t afford the consequences of non-compliance.