Paying For Medicare
The number one question I get from clients besides asking which plan they should choose, is wanting to know, “How do I pay?”
Let’s break it down. There may be several different payments you need to make:
1. Medicare Itself. They are part of Social Security and go under the name Center for Medicare Services or CMS. You will usually pay them $148.50 for your Part B with Part A being at no cost for most people. You may also pay an additional amount to CMS if you have higher income called IRMAA. More on how you pay for Part B coming up.
2. Medicare Advantage: Many Medicare Advantage plans have no premium. If your plan is premium free then the only payment you will need to make is to Medicare (CMS) for your Part B. If you do have a monthly premium there will be a number of payment options including deduction from your Social Security benefit, a monthly bill, or automatic deductions from your checking account or credit card. Your preferred payment method will be set up at the time of your enrollment. You can also go online to your portal or phone the carrier’s customer service number and change your payment method at any time.
3. Medigap Supplement: Remember, Medicare itself only pays 80% of your medical expenses. Almost everyone who sticks with Original Medicare purchases a Medigap Supplement to pay for the rest. The most popular Medigap plan, Plan G, pays for all of your remaining medical expenses that Medicare doesn’t cover other than for the annual $203 Part B deductible.
Note: If you have Medicare Advantage you will not have a Medigap supplement as you cannot have both.
If you do have a Medigap supplement each carrier has its own payment options with the most common method being automatic bank account deduction each month. This is set up at the time of enrollment. Very few carriers take credit cards. You cannot pay for a Medigap Supplement through a Social Security deduction. If you have an HSA it cannot be used to pay or a Medigap supplement.
4. Stand-Alone Prescription Drug Plan: If you have Original Medicare you will almost certainly have a Prescription Drug Plan (PDP) to provide you with drug coverage. Your PDP will have a monthly premium with payment options similar to Medicare Advantage plans. You can pay by Social Security deduction, credit card or bank account deduction. You can also pay for your drug plan with an HSA.
TO SUMMARIZE: Everyone, whether you have Original Medicare or Medicare Advantage pays for Item Number 1 above. From there, you pay either Number 2 and nothing else, or for Numbers 3 and 4 but not for Number 2. It all sounds like ordering from a Chinese food restaurant, doesn’t it?
Paying CMS (Medicare Itself) for Part B
When it comes to paying our monthly bills we have become spoiled. Most of us are used to convenience. We have forgotten how to actuality write a check and if we ever do and then have to pop the check in the mail go try and find a stamp.
With that said, Medicare itself (CMS), where you make your Part B payments, is a bit iffy on making it convenient. Because they are the government they are not in competition with anyone else. Other businesses need to offer us convenience or we’ll take our business elsewhere. Not so with Medicare. CMS knows that we cannot quit them for a more customer friendly government.
If you are taking Social Security then CMS will take your Part B payment directly from your monthly Social Security amount. However, you do not need to take Social Security to have Medicare. If you are not yet getting Social Security benefits then CMS will bill you instead.
Here is the interesting piece of information that’s important to know about your bill The first bill that you get will be for three or even sometimes for four months.
I often get calls from upset clients who expect to pay $148.50 a month for Medicare Part B and then a bill shows up for $445.50.
“What gives,” they want to know. I tell them that to look at the time period the bill is covering. This timeframe is printed in small letters on their first Medicare bill. That’s when they realize the $448.50 is for a three-month period and their heart stops pumping at 170 as they calm down.
It’s as though CMS is trying to give everyone a heart attack. But not to worry because your covered by that through your Medicare.
After you get your first bill your future billings will be monthly and no longer for three months at a time. There are a number of ways to pay your bill. One way is by mailing back a check or by entering your credit card number on the invoice you received and mailing it to CMS
The easiest way, however, is to open up an account at www.MyMedicare.gov (note the “My” in front of Medicare as Medicare.gov is a completely different website). You must wait for your first bill before opening up your account at MyMedicare.
Once you’ve open up your MyMedicare account you will be able to pay your bill by credit card (why not get credit card points paying for Medicare?) or by electronic transfer through your bank account. You can also set up automatic payments.
A Note About HSA’s
If you have an HSA you likely know exactly what an HSA is. If you don’t have an HSA you probably have no idea what an HSA is but in not having one knowing what an HSA is won’t be of any value, unless you just like knowing things. A Health Savings Account is an account which you and your employer have been contributing to, with the funds solely to be used for your medical needs.
When you go onto Medicare, even if it is just onto Part A, the rules are that you can no longer make further contributions to your HSA. The good news is that the money that is in your HSA account is still there and available to be used over time for any medical needs you have.
Your HSA funds can be used to make your Part B payments. The way this is usually done is by making your Part B payments yourself and then reimbursing yourself from funds in your HSA account. You can also use your HSA account to cover any medical copays and prescription drug copays. Dental and vision needs are another way to use up your HSA funds.
The one item you cannot use HSA to pay for is your Medigap supplement premiums.