Generally, most people become eligible for Medicare at age 65 or older, younger people with disabilities and people with End Stage Renal Disease (permanent kidney failure requiring dialysis or transplant). Original Medicare has two parts, Part A (Impatient Hospitalization) and Part B (Outpatient Services and Doctors Offices).
You are eligible for Medicare Part A at no additional cost, if you are age 65 or older and you or your spouse worked and paid Medicare taxes for at least 10 years or 40 quarters. You can get Part A at age 65 without having to pay additional premiums if:
- You are receiving retirement benefits from Social Security or the Railroad Retirement Board.
- You are eligible to receive Social Security or Railroad benefits but you have not yet filed for them.
- You or your spouse had Medicare-covered government employment.
If you or your spouse did not work and pay into your Medicare taxes for the full 40 quarters, you will be charged a monthly premium on a pro-rated bases depending on the number of total months you and/or your spouse paid.
You can qualify for Medicare coverage at age 65 (or older) if you are a U.S citizen or a permanent resident and you’ve lived here continuously for 5 years or more.
Keep reading if you would like to know more about the eligibility for each Medicare Part (A-D)
Eligibility for Medicare Part A
Upon turning 65 years old, you become eligible for Medicare Part A at no additional cost to you. This assumes that you or your spouse has legally worked in the United States for a minimum of 10 years. This is most specifically called out as working at least 40 quarters.
Some Americans have not worked the full 40 quarter or 10 years as they might have lived and worked out the the country for most of their lives. This is very common for Independent contractors, missionaries, and students who studies abroad and decided to stay overseas on a more permanent basis. If you fall into this category we highly recommend that you reach out to your local Social Security Office.
All is not lost if you have not paid into Medicare for the full 40 quarters. Depending on how many quarters you have paid into the government through your payroll taxes this will determine how much you might have to pay each month for Medicare Part A.
If you don’t qualify for premium-free Part A, you can buy Part A.
If you do not not qualify for zero premium Part A coverage because you didn’t obtain all 40 quarters, the following will give you an idea of the cost you could be facing.
Part A insurance could cost you between $259 or up to $471 each month in 2021 depending on how long you or their spouse worked and paid Medicare taxes. If you choose NOT to buy Part A, you can still buy Part B, however you are not able to obtain a Medicare supplement or a Medicare Advantage plan without having both Part A or Part B coverage in place.
Medicare Late Enrollment Penalty for Part A
If you or your spouse have a qualifying work history of at least 10 years (40 quarters), then you likely paid Medicare taxes. You’re eligible for premium-free Part A if you did.
If you’re not eligible for premium-free Part A, however, then you need to sign up during your Initial Enrollment Period and pay for Part A. If you don’t, you could face a 10% premium penalty for twice the number of years you could have had coverage but didn’t enroll.
For example, if you were first eligible for Part A in 2015, but you didn’t enroll until 2017, you would pay the 10% premium penalty for four years.
It can add up quickly. In 2017, the Part A premium for people with fewer than 30 quarters of qualifying work history was $413 a month, and $227 for people with 30 to 39 quarters of work history. If you had to pay the maximum penalty for just four years, you’d lose almost $2,000.
Eligibility for Medicare Part B
Medicare Part B eligibility typically begins at age 65 just like your Part A coverage previously discussed. Unlike Medicare Part A which you paid taxes for, you are required to pay a monthly premium for Medicare Part B. The cost for Part B for most Americans is $170.10 per month for plan year 2022.
This coverage takes care of your healthcare needs related to outpatient benefits such as doctor visits, inpatient & outpatient physician services, preventive service, lab work, MRI, CT Scans, and more. If you would like to learn more about Part B coverage, please check out our Part B page for more on what Medicare Part B covers.
If you or your spouse are still working and have what Medicare dems as creditable coverage through an employer sponsored plan, you have the option to stay with your employer plan and delay enrollment into Part B coverage without having to deal with a late enrollment penalty.
We recently met with an employer group in Long Beach, CA who wanted to explore an option of moving their Medicare eligible employees to Original Medicare with a Medigap / Medicare Supplement plan. The great news for this employer is not only will they save money but each of these employees will save money and picked up a broader benefits package.
Medicare Part B Late Enrollment Penalty
The Centers for Medicare and Medicaid Services (CMS) sets the standard Part B premium for Original Medicare. The standard rate for Medicare Part B is $170.10 a month in 2022.
Some people with higher incomes are are subject to the Income Related Monthly Adjustment Amount (IRMAA).
If you don’t sign up for Part B during your Initial Enrollment Period, you may be subject to a 10% Medicare Part B late enrollment penalty. This penalty is cumulative for every year that you could have had Part B but didn’t.
How do you calculate your premium penalty?
Let’s say you turned 65 in 2015, and you delayed signing up for Part B until 2022 (and you did not have employer insurance, which allows you to delay enrollment). Your monthly premium would be 70% higher for as long as you have Medicare (7 years x 10%). Since the base Part B premium in 2022 is $170.10, your monthly premium with the penalty will be $267.57 ($170.10 x 0.7 + $148.50).
Sometimes people ask us whether getting a late enrollment penalty will affect their eligibility to enroll in Medicare supplements. Fortunately, the answer is no. The guaranteed issue clock begins the month you sign up for Medicare Part B. From this moment you have 6 months to enroll into a Medicare Supplement plan. So long as you enroll prior to the six months ending you will have no health questions asked, whether you have a Part B penalty or not.
Eligibility for Medicare Part C
Original Medicare only includes Part A and Part B. As a consumer you can chose to move away from Original Medicare and into a Medicare Part C plans which is more commonly known by most people as Medicare Advantage plans.
Medicare Advantage plans are typically HMO style plans in which you will be placed into specific networks under the insurance carrier that may be available within your specific market.
These plans typically includes your Part D prescription drug coverage within the Medicare Advantage plan. If this is the case, you will not be able to obtain a separate Part D plan outside of that specific Medicare Advantage plan you enrolled into. You can enroll in Part C if you wish to get your benefits through a private insurance company instead of Original Medicare.
To be eligible for Part C, you must first be enrolled into both Medicare Parts A and Part B. Please ensure you do not stop paying for your Medicare Part B premiums or your will be disenrolled from your Medicare Advantage plan. You must also live in the plan’s service area. Once you enroll into a Medicare Advantage plan you have given up your rights afforded to you by Original Medicare.
If you would like to learn more about Part C and how it works please Click Here.
Medicare Part D
Medicare Part D provides you with coverage for your prescription drug that are not otherwise covered by your Part A or Part B coverage. Part D provides you prescription drug coverage for medication you obtain from a retail drug store like CVS or Walgreens.
To be eligible for Medicare Part D you will first need to be enrolled into either Medicare Part A and/or Part B coverage. You will want to make sure you review what Part D plans are covered in your local service area. You are not able to obtain a Part D plan that falls outside of your local service area.
While you might be able to find low cost drugs through a discount card company like GoodRX, it is important that you obtain an approved Part D plan to avoid late penalties.
Part D helps protect and reduce your overall cost burden against future catastrophic medication costs. It will also help give you lower copays on medications you take now.
It is important to mention and take special note of, if you do not enroll in Part D and you have no other creditable coverage, you may incur late penalties when you enroll into this coverage at a later time. This penalty will remain in effect forever and only goes higher each month you do not have creditable drug coverage.