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By Christine Benz | 02-14-2013 12:00 PM

Be Sure to Understand Your Medicare Rules

The Social Security Administration's Doug Nguyen and Andrew Salata clarify misconceived Medicare rules, including premiums, enrollment dates, differences from Social Security, and more.

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. Most retirees rely on Medicare for their health care during retirement, but they might not understand the specific rules governing the program. Joining me to discuss some of them are Doug Nguyen and Andrew Salata of the Social Security Administration.

Andrew and Doug, thank you so much for being here.

Doug Nguyen: Thank you for having us.

Andrew Salata: Thank you.

Benz: So, we've spent a lot of time talking about Social Security on Morningstar.com with you guys, and we've also been doing some work ourselves in this area. But we've spent less time talking about Medicare. So, I'd like to discuss the program generally, and then discuss some specific areas that seemed to confuse people in relation to Medicare.

Let's start with the first one, Doug, and this is something you say is a common misconception. People assume that if they are going to file and enroll in Medicare that they really don't need to worry about their health-care costs. Let's talk about why that's a problem?

Nguyen: Christine, certainly one of the most often overlooked areas in retirement planning is the health-care portion of retirement, and Medicare is going to cover most of the expenses. But not all. Part A, which I'll get into, covers the inpatient hospitalization costs, most of them; and then Part B covers the outpatient costs; it covers 80%. The patient is going to be responsible for the 20%, which they can get additional insurance...

Benz: Supplemental policy.

Nguyen: …a supplemental policy to take care of that 20%, but there is an additional cost to that. Andrew will talk about the Medicare Advantage Plans, Part C, in a little bit. But Part D is a prescription drug benefit, which also has some costs associated with it. There are premiums; there are deductibles that individuals will pay in. Of course, Social Security has a subsidy program for those with limited income and resources that they can help and so do the states.

Benz: So, Andrew, let's talk about some of those premiums associated with A, B, and D for sure, and then maybe you can talk a little bit about Part C, the Medicare Advantage piece. Let's talk about the costs that people can expect once they are enrolled in Medicare?

Salata: Well, for enrolling in Medicare, that's one to keep in mind, the magic number for that is 65 for enrolling in Medicare. But the premium for individuals who have worked and paid into Social Security and are eligible for a retirement benefit, the Medicare taxes people pay throughout the years of work also cover the enrollment for Part A hospital insurance. So, there is generally no premium.

However, for the 2% of the workers who work at a public or government job where they may pay into a different retirement system and not pay into Medicare, they may have to pay a premium of up to $441 a month. However, if you've had at least 30 credits--and credits are just the Social Security or Medicare taxes we pay throughout the years--then it's a little less. It's about $243 a month.

Most individuals though can also be eligible for the free premium Part A, if they're married and have coverage through a spouse or the spouse had the 40 credits.

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