Common Misconceptions of Health Insurance and Medicare

You must enroll in Medicare at 65 or be subject to a penalty.

False: While you have group health insurance (group > 20 employees) through you or your spouse, that coverage is good enough. If/when you enroll in Medicare you will not be subject to a penalty when you or your spouse had that qualifying coverage. This holds true even if you own a business offering qualified coverage. There is no age or number of years limit!

Medicare will be cheaper than group insurance. 

Often false: The cost of Medicare is based on income from 2 years prior. In 2024, based on your 2022 income, Medicare B can cost up to $594/month in 2024, Medicare D (drugs) up to $81/month. That is a combined $8,100/person or $16,200 for a married couple before any Medicare supplement policy. Add in Medicare Supplements at say $3,000/each and we’re at $22,200 plus any potentially larger out-of-pocket cost when compared to a group policy.

You cannot have a Health Savings Account (HSA) after age 65.

Sometimes true, sometimes false. Once covered by Medicare, including Medicare A, participation in an HSA is limited. If claiming Social Security there will be automatic coverage under Part A, even if no other enrollment coverage under Medicare.

However, if you delay claiming Social Security (another future topic) and do not claim Medicare because of other qualifying coverage, you can have an HSA with a high-deductible health plan. If just one between you or your spouse claims Social Security, you can still have an HSA for employee/spouse or family coverage but cannot get the extra $1,000 for an individual receiving Social Security benefits with mandatory Medicare A coverage.

Hidden Surprises:

• If you do a ROTH IRA conversion, there may be an increase in Medicare costs 2 years after the conversion. That income counts in the calculation of Medicare premiums. A hidden cost, if you will.
• Municipal interest does not help with the calculation of income for Medicare premiums. It is added to the calculation for determining your premiums.
• The grounds to appeal an increase in Medicare premiums due to a non-recurring event are very limited.
• Medicare looks back 6 months, so your HSA coverage must end before then. A partial-year HSA may be allowed.