Personal Finance

What to know about getting Medicare if you are 65 or older and lost your job

Key Points
  • You get eight months to sign up for Medicare when you lose workplace health insurance.
  • You'll need to plan for gaps in coverage because the program does not cover all health-care costs.
A patient arrives to Wyckoff Hospital in Brooklyn, New York, on April 5, 2020.
Bryan R. Smith | AFP | Getty Images

An unfortunate side effect can accompany a job loss: no more employer-subsidized health insurance.

For people age 65 or older in that situation, Medicare is generally the solution. While some in that age group might already have signed up at age 65 when first eligible for coverage, others may have delayed fully enrolling due to qualifying health insurance elsewhere — i.e., through their job (or their spouse's).

While keeping your employer-based health insurance under a federal law known as COBRA may be possible, it also could be a more expensive proposition. For one, you'd have to pay the full premiums instead of your employer footing some or much of those monthly amounts.

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Worse yet, COBRA coverage does not count as qualifying insurance in place of Medicare. And if you miss certain deadlines for enrolling in Medicare without having acceptable coverage, you could pay life-lasting penalties.

And, of course, Medicare is not free.

"Some are surprised that, after working for decades and paying Medicare taxes, they still have to shell out money," said Elizabeth Gavino, founder of Lewin & Gavino in New York and an independent broker and general agent for Medicare plans.

Yet if you find yourself now without employer-based insurance, it may be the best option. And, there are ways to reduce your costs if your income has dropped significantly.

Here's what to know.

The cost

As long as you have at least a 10-year work history, you pay no premiums for Medicare Part A, which covers hospital stays, skilled nursing, hospice and some home health services. If you don't meet the qualifications for it being premium-free, you could pay up to $458 per month for coverage.

Either way, Part A has a deductible of $1,408 per benefit period, along with some caps on benefits.

Part B — which covers outpatient care and medical supplies — has a standard monthly premium of $144.60 this year, although higher earners pay more (see chart below). It also comes with a $198 deductible (for 2020). After it's met, you typically pay 20% of covered services. You get eight months to sign up for Part B once you lose workplace coverage.

Parts A and B generally don't cover prescriptions. That's where a Part D drug plan comes in.

You can get a standalone plan to use alongside original Medicare. Or, you can sign up for an Advantage Plan (Part C), which are offered by private insurance companies and typically include prescription drug coverage. If you go this route, your Parts A and B benefits will be delivered via the insurer offering the plan (which may or may not have a premium).

The average cost for Part D coverage in 2020 is about $42 per month, although high earners pay extra for their premiums (see chart below). The maximum deductible for Part D this year is $435.

If you already have Part A and are signing up for Part B because of a job loss, there's a form you and your ex-employer should fill out. This basically is to avoid late-enrollment penalties by ensuring that you had qualifying coverage during the period of time you were eligible for Part B but were not enrolled.

Coverage gaps

Be sure to think about how you'll pay for the things Medicare excludes. For instance, it generally doesn't cover dental work and routine vision or hearing care. Same goes for long-term care, cosmetic procedures and medical care overseas.

Many people decide to pair original Medicare with a supplemental policy — aka Medigap — to help cover out-of-pocket costs such as deductibles and coinsurance.

While Medigap policies are standardized regardless of which insurance company sells them and where you live, the premiums can vary from insurer to insurer and among locations. And, experts say, this makes it important to understand the differences you may see when evaluating your options.

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You'd want to know "a carrier's premium rating system, its claims history and how good its customer service department is," Gavino said.

If you end up choosing an Advantage Plan, there's a good chance limited coverage for dental and vision will be included. Additionally, these plans have their own copays, deductibles and out-of-pocket maximums.

For long-term care coverage, some people consider purchasing insurance specifically designed to cover those expenses.

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