Medicare, Medicaid & Prescription Drug Benefits Explained

Do You Really Need to Sign Up for Medicare at 65?

Many people assume Medicare enrollment is automatic at 65. It is not always required.

You must sign up for Medicare Part A and Part B at 65 only if you do not have creditable coverage. Creditable coverage means active health insurance through your own job or your spouse's job, where that employer has 20 or more employees.

If you have that coverage, you can delay Medicare enrollment for as long as you keep working — even past 75 or 85. When you eventually stop working, you have 8 months to sign up without a penalty.

Important exceptions:

• ACA marketplace plans do not count as creditable coverage.
• Retiree health insurance does not count either.
• It must be coverage from current active employment.

If you delay and then sign up late without a valid reason, you face a 10% penalty on your Part B premium for life. One exception: if you were on disability benefits and had a penalty, that penalty resets when you turn 65.

Health Savings Accounts and Medicare: A Common Mistake

If you have a Health Savings Account (HSA) and are still contributing to it, pay close attention.

You cannot keep contributing to an HSA once you enroll in Medicare Part A. You can keep the money already in the account and spend it, but new contributions must stop.

The rule: stop contributing to your HSA at least 6 months before you start Part A. This is an IRS rule, not a Social Security rule. Social Security employees will not ask about your HSA when you enroll, so it is your responsibility to track this deadline.

Help Paying for Prescription Drugs: Extra Help and Part D Smoothing

Extra Help (Low-Income Subsidy)

If you have Medicare and struggle to afford prescription drugs, you may qualify for Extra Help — also called the Low-Income Subsidy (LIS). This federal program reduces what you pay for medications under a Medicare Part D plan. Apply through Social Security; it is one of the simpler applications available.

The annual out-of-pocket cap for Part D prescription costs is $2,100 (as of the current year). If you are near or over that limit, Extra Help can make a significant difference.

Part D Smoothing

Some medications are very expensive early in the year, which can make it impossible to pay rent or utilities in January and February. A newer feature called smoothing spreads your total annual out-of-pocket drug costs evenly across all 12 months, rather than hitting you with large bills at the start of the year. This is supposed to be automatic — confirm with your plan that it is applied to your account.

Manufacturer Assistance Programs

Drug manufacturers sometimes offer discount programs for expensive medications. Be aware: many of these discounts apply only before you are on Medicare. Once you enroll in Medicare, the manufacturer may no longer cover the cost. Check with your specific drug's manufacturer and confirm how Medicare enrollment affects any discount you receive.

State Pharmacy Assistance Programs

Many states also have their own programs to help with prescription costs. Contact your state's pharmacy assistance program to see what is available in your area.

Medicaid and the Medicare Savings Program

Millions of people receive both Medicare and Medicaid at the same time. This is sometimes called benefit stacking, and it is completely legal and encouraged.

Every state has Medicaid, though many states use a different name for it. If you are struggling to pay your Medicare Part B premium, contact your state Medicaid office and apply. If approved, Medicaid may pay that premium for you through what is called the Medicare Savings Program (MSP).

The MSP has several levels:

• QMB (Qualified Medicare Beneficiary)
• SLMB (Specified Low-Income Medicare Beneficiary)
• QI (Qualifying Individual)

Each level has different income limits. The higher levels cover more costs. Confirm current income thresholds with your state Medicaid office, since they change.

You can apply for Medicaid at any age. If you are denied, appeal the decision. With recent budget cuts to Medicaid, agencies may deny eligible people simply due to funding pressure. An appeal is your right.

Medicare Advantage, Supplement Plans, and OTC Benefit Cards

Choosing a Plan

Original Medicare (Parts A and B) has coverage gaps. The biggest: Part B has a 20% coinsurance with no cap, meaning you pay 20% of any medical bill no matter how large.

To fill those gaps, you have two main options:

• Medicare Supplement (Medigap) plans — pay a monthly premium and cover most or all of the gaps. Plan G and Plan N are common choices.
• Medicare Advantage plans — often have lower or zero premiums but may have higher costs when you use care.

Neither option is right for everyone. A licensed Medicare broker (someone contracted with multiple companies, not just one) can compare all plans available in your area at no cost to you.

OTC and Grocery Benefit Cards

You may have seen ads for grocery cards or over-the-counter (OTC) benefit cards worth hundreds of dollars per month. These are real — but they are tied to specific Medicare Advantage plans, particularly Dual Special Needs Plans (D-SNPs), and only available in certain zip codes. What is offered in one part of the country may not exist in your area. Work with a trusted, local broker to find out what is actually available where you live.

Part B Give-Back Plans

Some Medicare Advantage plans offer a "Part B give-back," which pays part of your monthly Part B premium. These can help if you cannot get Medicaid to cover your premium. However, read the full plan carefully — plans that give money back in one area often make it up through higher costs elsewhere, such as higher hospital copays.

Warning: Switching Plans When You Have Home Health Care

If you currently receive home health care paid through Medicaid, be very careful before switching Medicare Advantage plans. Some plans do not cover the same home health providers. Before switching, call your home health provider and confirm they accept the new plan. A $200 monthly benefit card is not worth losing your in-home care.

PACE: Staying Out of a Nursing Home

PACE — the Program of All-Inclusive Care for the Elderly — is a Medicaid-funded option for people who need nursing-home-level care but want to stay at home. It provides a full range of medical and support services coordinated through one program.

PACE is generally available to people age 55 and older who meet their state's nursing-home level of care. It is administered by states through Medicaid. Not every area has a PACE program, so contact your state Medicaid office to find out if one is available near you.

SSI Resource Limits and Benefit Stacking

If you receive Supplemental Security Income (SSI), there are limits on how much you can have in savings and other resources:

• Single person: up to $2,000 in countable resources
• Married couple: up to $3,000 in countable resources

Your home and your primary car are generally not counted as resources. Income rules vary by living situation and state.

If you receive SSI, you are typically automatically eligible for your state's Medicaid program. Make sure you apply for Medicaid if you have not already — it can cover medical costs that SSI alone does not.

Benefit stacking is legal and encouraged. A person can receive Social Security retirement or disability benefits, SSI, Medicare, Medicaid, a Medicare Advantage plan, energy assistance, and housing assistance all at the same time — if they qualify for each. Many people miss out on one or more of these programs simply because they do not know they exist.