- Sixty-five is a crucial age for Medicare, yet many individuals who are on the brink of making a coverage decision do not fully understand the program.
- Certain sticking points seem to trip individuals up more than others — such as how Medicare affects your Social Security claiming decision and checks, as well as coverage loopholes.
If you're approaching retirement, chances are you can't pass a simple four-question quiz on Medicare.
Sixty-five percent of individuals ages 60 to 64 who were put to the test failed, getting two or fewer questions correct. The online MassMutual survey polled 500 individuals this month.
In contrast, almost half of all adults — 47 percent — failed a quiz on Social Security that MassMutual released earlier this year.
The quiz highlights how much people still do not know when it comes to Medicare, said David Freitag, a financial planning consultant at MassMutual.
That needs improving, he said, because the individual decision regarding coverage is just as complicated as it is when it comes to Social Security.
"You almost have to have a custom-made suit or a custom-made dress for the Social Security decision," Freitag said. "I think the same analogy can be extended to Medicare."
Because there are penalties if you do not sign up for Medicare on time, you should circle a date on your calendar.
"If you miss the Medicare window, then you end up paying penalties for as long as you're under the Medicare system, and those penalties can be severe," Freitag said.
Missing the enrollment window on Medicare could trigger a 10 percent penalty every year for the rest of your life.
And if you miss the window on Medicare Part D, the prescription drug plan, you will pay an extra 10 percent per month for the rest of your life.
You have a seven-month window near your 65th birthday to sign up — three months before your birthday, the month of your birthday and three months after that date.
"There's definitely economic financial encouragement to make this date," Freitag said.
One area that commonly trips people up is determining the age at which they need to file for Medicare versus when they can claim Social Security benefits.
Age 65 is the Medicare start date, while age 66 or 67 — depending on the year in which you were born — is full retirement age for Social Security.
"Don't link the Medicare decision and the Social Security decision in lockstep," Freitag said. "Those are different and distinct decisions to be made, and they're both really important."
If you claim Social Security retirement benefits at the same time as your Medicare enrollment, you will reduce the amount of the check you receive for the rest of your life, as Medicare premiums are automatically deducted.
Part B premiums are means-tested, which means that if you earn more money, you will pay more for coverage.
To a lot of people, that's a "big surprise," Freitag said, and they can erroneously assume their Social Security payments have gone down.
"What the case is is their Medicare Part B premium just went up," Freitag said.
That was the case for many people when the top threshold was reduced between 2017 and 2018.
(Source: Centers for Medicare and Medicaid Services. *Part B premiums are based on tax returns from two years earlier. So for 2018 it's based on your 2016 return.)
One of the sticking points in MassMutual's quiz is whether Medicare covers your health-care services and supplies when you are traveling outside of the U.S.
In order to have that covered, you would need a Medicare supplemental plan that fills that coverage gap. Not all of those plans do, so that is something to keep in mind when shopping for a plan.
Other features to keep in mind when choosing that coverage is whether you must pay a deductible or not.
Because Medicare is such a complicated decision, you should do some research ahead of time.
Visiting Medicare's website is a great way to find answers to common questions, Freitag said.
To drill down on your personal situation, consult a financial advisor or your State Health Insurance Assistance Program, or SHIP.
True-false quiz questions
1. If I am not eligible for Medicare but my spouse is eligible, I can receive Medicare benefits at age 65.
2. If you meet certain requirements, both traditional Medicare Parts A and B are free when you sign up.
3. When you enroll for Medicare, you must also enroll for Social Security.
4. Medicare pays for your health care services and supplies when you are traveling outside of the country.
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