When Can You Delay Taking Medicare?

 

While you are eligible to apply for Medicare when you are 65, there are circumstances where you might not want to, particularly if you are working full time for a larger employer or contributing to a health savings account. However, there can be penalties if you don't sign up at the right time, so it is important to know when you can delay signing up for Medicare without facing a penalty.

You can first sign up for Medicare during your Initial Enrollment Period, which is the seven-month period that includes the three months before the month you become eligible (usually age 65), the month you are eligible and three months after the month you become eligible. If you do not sign up for Medicare Part B during this period, your Part B premium may go up 10 percent for each 12-month period that you could have had Part B, but did not take it. Your Medicare Part D premium will increase at least 1 percent for every month you wait. There is an exception to these penalties for some people who are still working.

If you work for an employer with 20 or more employees, you can usually delay signing up for Medicare Part B without penalty because your employer's insurance will be considered the primary insurer. However, if your employer has fewer than 20 employees, you will probably need to sign up for Medicare Part B when you are first eligible or face penalties down the road.  Check with your employer to make sure your current insurer will expect Medicare to be your primary insurer.

If you are working or have other private insurance, you may be able to delay Medicare Part D without a penalty. Beneficiaries are exempt from the penalties if their insurance is at least as good as Medicare's. This is called "creditable coverage. Your insurer should let you know if their coverage will be considered creditable.  You may also be able to avoid or delay getting Part D if you enroll in a Medicare Advantage plan that offers prescription drug coverage.

If you are working, you generally can enroll in Medicare Part A, which is free for most people, without consequences. However, if you are contributing to a health savings account (HSA) at work, you cannot sign up for Medicare. This is true even if your employer has fewer than 20 employees. Part A covers institutional care in hospitals and skilled nursing facilities, as well as certain care given by home health agencies and care provided in hospices, so you will need to analyze whether the HSA is worth losing out on the Medicare Part A coverage. If you are already receiving Social Security, you will be automatically enrolled in Part A, so you will have to stop contributing to the HSA.

IRS Issues Long-Term Care Premium Deductibility Limits for 2017

 

The Internal Revenue Service (IRS) is increasing the amount taxpayers can deduct from their 2017 taxes as a result of buying long-term care insurance.

Premiums for "qualified" long-term care insurance policies (see explanation below) are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 10 percent of the insured's adjusted gross income, or 7.5 percent for taxpayers 65 and older (for 2016; this rises to 10 percent in 2017).

These premiums -- what the policyholder pays the insurance company to keep the policy in force -- are deductible for the taxpayer, his or her spouse and other dependents. (If you are self-employed, the tax-deductibility rules are a little different: You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed a certain percentage of your income.)

However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the deductibility limits for 2017. Any premium amounts for the year above these limits are not considered to be a medical expense.

Attained age before the close of the taxable year	Maximum deduction for year
40 or less	$410
More than 40 but not more than 50	$770
More than 50 but not more than 60	$1,530
More than 60 but not more than 70	$4,090
More than 70	$5,110

Another change announced by the IRS involves benefits from per diem or indemnity policies, which pay a predetermined amount each day.  These benefits are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $360 per day, whichever is greater.

  

What Is a "Qualified" Policy?

To be "qualified," policies issued on or after January 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold.

It's Time to Reassess Your Medicare Choices

 

Are your Medicare plans still working for you? Medicare's open enrollment period, in which you can enroll in or switch plans, runs from October 15 to December 7.  Now is the time to review your options to determine if switching plans could save you money.

During this period you may enroll in a Medicare Part D (prescription drug) plan or, if you currently have a plan, you may change plans. In addition, during the seven-week period you can return to traditional Medicare (Parts A and B) from a Medicare Advantage (Part C, managed care) plan, enroll in a Medicare Advantage plan, or change Advantage plans. Beneficiaries can go to www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227) to make changes in their Medicare prescription drug and health plan coverage.

Even beneficiaries who were satisfied with their plans in 2016 need to review their choices for 2017. Be sure to carefully look over the plan's "Annual Notice of Change" letter. Prescription drug plans can change their premiums, deductibles, the list of drugs they cover, and their plan rules for covered drugs, exceptions, and appeals. Medicare Advantage plans can change their benefit packages, as well as their provider networks.

Avalere Health, a consulting and research firm, reports that premiums for the 10 most popular drug plans will rise an average of 4 percent next year. According to the Centers for Medicare and Medicaid Services, the average Medicare Advantage premium is expected to decrease from $32.59 on average in 2016 to $31.40 in 2017.

Remember that fraud perpetrators will inevitably use the open enrollment period to try to gain access to individuals' personal financial information.  Medicare beneficiaries should never give their personal information out to anyone making unsolicited phone calls selling Medicare-related products or services or showing up on their doorstep uninvited.  If you think you've been a victim of fraud or identity theft, contact Medicare.  For more information on Medicare fraud, click here. 

 Here are more resources for navigating the Open Enrollment Period:

• The 2017 Medicare & You handbook, which all Medicare beneficiaries should have received. The handbook can also be downloaded online at: https://www.medicare.gov/medicare-and-you/medicare-and-you.html or https://www.medicare.gov/pubs/pdf/10050-Medicare-and-You.pdf

• The Medicare Rights Center: www.medicareinteractive.org

• Your State Health Insurance Assistance Program, which offers independent counseling: https://www.shiptacenter.org

• Kiplinger's "How to Compare Medicare Advantage Plans"

• Medicare Plan Finder: www.medicare.gov/find-a-plan