Welcome to Medicare School Daily where we help you understand Medicare, save money,
avoid mistakes, and above all else, get the most out of your Medicare benefits.
Today's topic is understanding the Medicare Part A penalty and how you can avoid it.
As you know, when you go on Medicare, you're going to be issued a Medicare card.
And this is, of course, what they look like today.
And original Medicare is broken up into two parts.
Part A and part B. Part A is called hospital; Part B is called medical.
Pretty much A is everything inpatient related;
B pretty much everything outpatient related.
But today's topic, all I'm doing is focusing on the penalties that could be associated
with Medicare Part A. Now, there are two groups of people as we look at the penalties that
are associated with Part A. So the question is who will get penalized for Part A?
Two groups are those who have 40 quarters paid into the Medicare/Social Security system,
and those without 40 quarters.
As we work, we pay payroll taxes or FICA taxes.
Part of that goes to Social Security; part of it goes to Medicare.
And as long as we have paid in for at least 40 quarters,
and most of you, by the way, have paid a lot more than that, but at least 40 quarters,
which is 10 years worth of work.
You will never be penalized for your Part A regardless of when you take it.
But those who are without 40 quarters, you could be subject to penalties.
Now, what we like to see happen is if you don't have 40 quarters, if there is some way,
you get moved over into this column to do that.
So you get 40 quarters.
Well, how is that possible?
Well, number one, you can actually draw from a spouse.
And so if you're married to someone presently and they have 40 quarters and you've been
married for at least a year and they're at least 62 years old, you can draw from their
benefits.
Now, if you're no longer married, but were married for at least 10 years and that person
is at least 62 and they have 40 quarters and you did not remarry prior to the age of 60,
then you can actually go to that previous spouse and you can draw your Medicare benefits
from them.
So that's one way.
The other way is this: you can actually go back to work.
In fact, I had this happen just recently.
I had a lady who had 36 quarters.
And the first thing I asked her of course, are you married?
She said no.
And I said, well, I have you ever remarried?
She said, yes. How long?
The marriage lasted 6 years, actually, not 10.
And so she was not able to go back to a spouse.
So what we encouraged her to do is to go back to work.
And this is actually what she's doing presently.
Why?
Because a quarter is actually not three months.
Now, I cannot get more than four quarters in a year, but I do not have to work a full
three months to get one quarter.
What I have to do is I have to make the minimum amount of money - $1,410 of taxable income.
And that gives me a quarter.
So if I need four quarters, as she did, we multiply that times four.
What does she have to make?
$5,640 of taxable income.
And that gave her her four quarters.
So that may take you one month, two months, six months, whatever it takes to get the $5,640.
And you picked up your 40 quarters.
And so those with 40 quarters, no penalty.
Those without them, if we can't move over in this column, then you are going to be subject
to penalties.
And so this group is never penalized and this group could be penalized if their enrollment
is late.
All right?
So that's the way that works.
So this chart should make this very clear as to who gets a penalty.
So if someone has 40 quarters or more, you'll never, ever be penalized whatsoever.
It's going to be free regardless of when you take your Medicare.
There's no penalty whatsoever and your premium also will be free.
Now, if we have 30 to 39 quarters now, we have to buy it every month.
$252 a month, $3,000 a year right now.
Now, that's why we're saying if we can get to 40, we'd like to move from this column
up to here so we can have the part a premium free for the rest of our life.
And so if we have 0 to 29 now, we've got to buy it for $458.
And what I'm trying to teach is this group of people here, the ones who have less than
40 quarters, they're the ones that have to pay a penalty.
So they do not enroll into Medicare at retirement or at 65.
If they're no longer working, then they will be assessed a penalty.
And the way it works is this: for every year you go without Medicare Part A when you
should have had it, you will have a 10% penalty.
And if I go without one year, I'm going to have to pay that penalty for two years.
If I go without two years, I will pay a 20% penalty and I will pay that for four years.
So the penalties are in percentage and they're always assessed to the premium that you would
be responsible for.
So it's applied to that right there.
So I'm saying if you have 40 quarters or more, there's never a penalty assessed whatsoever.
So the last question is, do you have to enroll into Part A?
Well, are you working or are you not?
So if you are retired, the answer to that question is yes
you have to take Medicare Part A and Part B. So if you or your spouse are no longer working, you're
retired,
you must enroll into Part A. But for those of you that are still working, Do you have to
enroll into Part A?
And the answer is no, you don't.
You do not.
Now, some of you may choose to do that, but you're not required to do that.
And there's some consequences if you are still working and you take Part A. I want to make
sure you're clear on those two consequences. If you have
an HSA, which means you have a high deductible health plan that has a health savings account
attached to it.
Then if you do enroll in Part A while still working with an HSA, you must stop your
contributions to your HSA.
Now, your HSA money is still yours, but we can make no new contribution to the HSA once
we take Part A.
And there's a second consequence that rarely people hear about, and that is that some of
you are going to be using a Medicare Advantage plan and with Medicare Advantage plans will
come a trial period.
But if you take Part A, you're hurting yourself for a Medicare Advantage trial period by enrolling
while you're still working.
So those are the two consequences.
So the question is, do you have to take why you're still working?
And the answer is no.
Now, if you were to talk to the Social Security office or Medicare, if you ask them that question,
should I take Part A?
They will say absolutely, yes.
And here's why.
They always say, well, because it's free.
Well, of course it's free.
Why?
Because you have 40 quarters.
It's not free because you're enrolling in at this time.
It's free because you or your spouse had the 40 quarters.
OK?
Second, they'll tell you there may be something that Medicare would cover that your work plan,
your group plan at work would not cover.
And that is possible.
I see it rarely, but it could happen.
But that's the second reason they tell you to do it.
And those are fine.
But here's what I want you to realize. I don't want you to enroll into Part A while you're still
working because of the fear of a penalty. If you have 40 quarters paid in,
you do not have to fear being penalized because it will be free regardless of when you take it.