What Every American Has To Know About Signing Up For Medicare

Medicare is the one form of health insurance to which most Americans feel entitled. After all, Americans with their employers pay a 2.9% tax on every dollar they earn for their entire working lives to pay into the system.

In 2013, Americans will also pay a 3.8% tax on their "unearned" income, such as dividends, interest, rents, and capital gains, and high-income Americans will pay another 0.9% on their wages. No matter what your income level, you have to pay something for Medicare. Medicare is supposed to be there for them when they turn 65.

But the reality of the American Medicare system is that Medicare rules are complex, they are punitive, and making a mistake can result in lifetime penalties - a reality that is not made clear in the government-published guide Medicare and You.

Don't Wait 'Til Age 65 to Sign Up for Medicare

The Medicare guide you can get online or from your local Social Security office makes it very clear that Americans need to sign up for Medicare in the three months before their 65th birthdays. Unfortunately, the guide also says, "If you're 65 or older, you can also apply for premium-free Part A and Part B (for which  you pay a monthly premium) at" and then the on-line guide lists a link to the Social Security Administration.

If you aren't reading carefully, however, you might assume that Medicare is something you only get after the age of 65, and it's free. Basic Medicare coverage is provided without any additional monthly payment, funded from your contributions into the system and the contributions of people who are continuing work (and you, too, if you continue to work after 65). Complete Medicare coverage cost an additional monthly premium. And there are very good reasons you may want at least Medicare Part A (at no monthly cost) and Medicare Part B (at a variable monthly cost).

Basic and Not-So-Basic Medicare Coverage

The level of coverage that everyone gets with Medicare is called Part A. This plan covers hospitalizations of 3 days or more, "rehabilitation" services for up to 20 days after a hospital stay, some home healthcare services, and hospice care at the end of life. It's a lot better than nothing, but most medical expenses simply aren't covered. Moreover, there are lifetime limits on hospitalization coverage that kick in whenever you have to spend more than 90 days in the hospital in a single year.

If you want to get coverage for more than the basics, you have to enroll in Medicare Part B. This Medicare coverage takes care of doctor visits, laboratory services, lengthy hospital stays, chemotherapy, and healthcare supplies. (Americans can also enroll in Medicare Part C and Medicare Part D for other medical expenses, such as medication.) The thing most Americans don't know is that how you pay for Medicare Part B for the rest of your life is determine by when you enroll in it.

When Do You Have To Sign Up For Medicare Part B?

The essential thing everyone who wants Part B coverage on Medicare needs to know is that if you want coverage at age 65, you have to sign up before age 65. The initial enrollment period for Medicare Part B  begins three months before your 65th birthday, includes the month of your 65th birthday, and continues for the three months after your birthday. If you wait until your 65 birthday to sign up, however, your coverage will be delayed.

If you are already receiving Social Security retirement benefits before your 65th birthday, you will be automatically enrolled in Medicare Parts A and B and your Medicare card will be sent to you. (Nonetheless, it doesn't hurt to double check with your Social Security office to make sure you are on their lists.) If you are not already receiving Social Security retirement benefits before your 65th birthday, then there is a series of decisions you need to make.

1. If you are covered by health insurance at work, you need to find out if your plan assumes you will enroll in Medicare Part B.

Sometimes health insurance plans continue covering costs after age 65 that would otherwise be covered by Medicare Part B. Usually they don't. If your plan does cover these costs, you need a letter (in writing, on paper) that certifies that you don't need Part B coverage as long as you are covered by their plan. Otherwise you will pay a 10% penalty each and every month for each and every year you could have been enrolled in Medicare Part B and were not.

2. If you are covered by a health savings account to which your employer contributes, or if you continue to put tax-exempt money into a health savings account of your own, you need to notify Social Security.

Under current rules, if you continue a health savings account, you have to opt out of both Medicare Part A and Medicare Part B.

3. If you did not pay into Social Security, but your spouse (or your deceased spouse) did, special rules apply.

If you have never paid into Social Security (for instance, you started working for the federal government before 1983, or you were covered by a teacher retirement system), then you may qualify for Medicare under your spouse's account, but you will have to apply in person at your local Social Security office, not online. The same deadlines apply for spousal benefits as for people who paid into the system directly.

4. If you never paid Medicare taxes, and you have never been married to a person who paid Medicare taxes, you can buy into the system.

Currently the buy-in for Medicare Part A costs $415.00 per month. Your Part B premium is extra - and depends in part on when you enroll in Part A.

5. If you sign up now, you may qualify for income-related breaks on the cost of your Part B premiums.

Medicare Part B is not cheap, but most people can qualify for a discount. If you are a single person earning less than $85,000 per year, or you are a married couple earning less than $170,000 per year, then you may get a discount on the cost of your Part B premiums, if you apply in a timely fashion. If you happen to have an especially "good year" at age 64, receiving a payout on your retirement account, for example, you should discuss filing form SS-44, Medicare Income-Related Monthly Adjustment Amount, with a Social Security Representative. You may also qualify for reductions in your monthly premiums for Medicare Part D, which covers prescription drugs.

The bottom line about signing up for Medicare is that doing it on time usually saves tens of thousands of dollars over the course of your life. Medicare rules are constantly changing, so rely on your Social Security  office for the very latest information. You paid their salaries. They are there to help you. But see them sooner rather than later.