Many people hear that Medicare Part A is free. That is often true, but it does not tell the whole story.
Medicare Part A is hospital insurance. It may help cover inpatient hospital care, skilled nursing facility care after a qualifying hospital stay, hospice care, and certain home health services.
Most people qualify for premium-free Part A because they, a spouse, or sometimes a former spouse paid Medicare taxes while working. However, some people may need to pay a monthly premium for Part A. Even if your Part A premium is zero, you can still have deductibles, copayments, and other out-of-pocket costs when you use care.
Is Medicare Part A really free?
Medicare Part A is often called “free” because many people do not pay a monthly premium for it. The more accurate term is premium-free Part A.
Premium-free does not mean you will have no health care costs. Part A generally has a deductible for each benefit period. A benefit period can begin when you are admitted to a hospital or skilled nursing facility and can end after you have been out of inpatient care for a set period of time.
You may also have daily copayments if you have a longer hospital or skilled nursing facility stay. The exact Medicare cost-sharing amounts can change from year to year.
So, while most people do not pay a monthly Part A premium, it is still important to plan for the costs that may come with hospital care.
Who qualifies for premium-free Medicare Part A?
You will generally qualify for premium-free Part A if you or your spouse worked and paid Medicare taxes for enough time. In many cases, that means earning about 40 work credits, which is roughly equal to 10 years of work.
You may qualify based on:
- Your own work history
- Your current spouse’s work history
- A former spouse’s work history in certain situations
- A deceased spouse’s work history in certain situations
- Qualifying disability or certain medical conditions, if you are under age 65
Work credits are based on wages or self-employment income on which Medicare taxes were paid. You can earn only a limited number of credits each year, so the number of years worked matters more than working extra hours in a single year.
Social Security usually determines whether you qualify for premium-free Part A. If you have questions about your work record, it may be helpful to review your Social Security account before you enroll in Medicare.
What if you do not have enough work credits?
If you do not qualify for premium-free Part A, you may be able to buy it. The monthly premium generally depends on how many work credits you or your spouse have earned.
People with fewer work credits may pay a higher Part A premium than people who are closer to the required amount. Part A premium amounts may change each year.
If you need to buy Part A, there may be other enrollment rules to consider. For example, you may generally need to enroll in Part B as well. Part B has its own monthly premium and out-of-pocket costs.
Because buying Part A can affect your total Medicare budget, it may be wise to look at all of your coverage choices before making a decision. This is especially important if you are still working, have employer coverage, or are covered through a spouse’s job.
Do you pay for Medicare Part A if you keep working?
Many people who keep working past age 65 can still enroll in premium-free Part A. However, there is one important issue to consider: Health Savings Accounts, often called HSAs.
Once you are enrolled in any part of Medicare, you generally can no longer contribute to an HSA. Part A coverage may also be backdated for some people who enroll after age 65, which can affect HSA contribution planning.
If you want to continue making HSA contributions through your employer, consider speaking with your benefits department, tax adviser, or a qualified Medicare professional before enrolling in Part A.
Also, having premium-free Part A does not always mean you need to enroll right away. The best timing can depend on your employer coverage, the size of the employer, whether your coverage is active, and your HSA plans.
What costs can you have with Part A besides the premium?
Even with premium-free Part A, you may have costs when you receive services. These costs can include:
- A deductible when you are admitted as a hospital inpatient
- Copayments for longer inpatient hospital stays
- Copayments for certain skilled nursing facility stays
- Costs for services that do not meet Medicare coverage requirements
- Costs for care Medicare does not cover
It is also important to understand that not every hospital-related service falls under Part A. For example, doctor services during a hospital stay are generally billed under Part B. Some outpatient hospital care may also fall under Part B rather than Part A.
A Medicare Supplement insurance plan, also called Medigap, may help pay certain out-of-pocket costs left by Original Medicare. Benefits can vary by plan, carrier, and state. Medicare Advantage plans handle costs differently and may use provider networks, plan rules, and annual out-of-pocket limits.
Can you delay Medicare Part A?
Some people can delay Part A, particularly if they have active employer coverage and want to keep contributing to an HSA. But delaying Medicare is not a one-size-fits-all choice.
If you do not have qualifying coverage and delay Medicare when you should enroll, you may face coverage gaps or penalties for Part B and Part D. Part A itself may also have a late enrollment penalty if you need to buy it and do not enroll when first eligible.
Your personal situation matters. Consider your work status, employer coverage, HSA contributions, prescription drug coverage, and whether you qualify for premium-free Part A.
The bottom line on Medicare Part A premiums
Most people age 65 and older qualify for premium-free Medicare Part A through their own or a spouse’s work history. Still, premium-free Part A does not mean hospital care has no cost. Deductibles, copayments, and services outside Part A can add to your expenses.
If you are approaching Medicare and want help understanding how Part A fits with the rest of your choices, reach out to Eric for free, no-pressure guidance. He can help you review your Medicare options and understand how a Medicare Supplement plan may fit your needs.