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Chapter 3: Coverage Confusion – Balancing Medicare with Other Health Plans

Navigating Medicare is complicated enough, but things can get even trickier if you have other health coverage—from an employer, COBRA, retiree benefits, or the Veterans Administration. Understanding how Medicare works with other health plans is crucial to avoid gaps in coverage and unexpected expenses.

In this chapter, we’ll explore how Medicare interacts with different types of health insurance and the common mistakes to avoid.

A couple in their late mid-60s sits at a kitchen table, each holding different health insurance documents. The woman looks at a Medicare plan, while the man holds employer insurance papers. Both appear thoughtful, with multiple options laid out in front of them.

Medicare as Primary or Secondary Insurance

One of the most important things to know when you have other health insurance is whether Medicare will act as your primary or secondary payer. This depends on several factors, including your employment status and the size of your employer.

  1. Employer Coverage (If You’re Still Working)
    • If your employer has 20 or more employees: Your employer’s plan is usually your primary insurance, and Medicare is secondary. You can delay enrolling in Medicare Part B without penalty while still covered by this insurance.
    • If your employer has fewer than 20 employees: Medicare becomes your primary insurance, even if your employer’s plan still covers you. In this case, you should enroll in Medicare Part B during your Initial Enrollment Period to avoid penalties and gaps in coverage.
  2. COBRA
    • Key fact: COBRA lets you keep your employer’s health insurance for a limited time after you leave your job, but it’s not considered creditable coverage for Medicare. If you delay enrolling in Medicare to keep COBRA, Medicare will consider you uninsured and face penalties.
    • Best practice: Enroll in Medicare during your IEP to avoid penalties, and then decide whether to keep COBRA for additional coverage.
  3. Retiree Health Plans
    • What you need to know: Retiree health plans typically become secondary to Medicare once you turn 65. Medicare will pay first, and your retiree plan will cover some of the remaining costs.
    • Key mistake: Failing to enroll in Medicare when your retiree health plan becomes secondary can leave you without primary coverage and subject to penalties.
  4. TRICARE and VA Benefits
    • TRICARE for Life (TFL): If you’re a military retiree, TRICARE for Life works with Medicare. Medicare becomes your primary insurance, and TRICARE covers some of your remaining costs. Enrolling in Medicare Parts A and B would be best to keep your TRICARE benefits.
    • VA Healthcare: Veterans enrolled in VA healthcare can use their VA benefits for care at VA facilities and Medicare for care at non-VA facilities. The key here is to use the right coverage in the right setting to avoid out-of-pocket costs.

Medicare and Marketplace Plans

If you’re enrolled in a Marketplace plan (Obamacare) and become eligible for Medicare, you should transition to Medicare coverage. You cannot keep a Marketplace plan once enrolled in Medicare without potentially facing penalties or losing any subsidies you may have had.

  • Important note: Once you’re eligible for premium-free Medicare Part A, you are no longer eligible for Marketplace subsidies. Be sure to cancel your Marketplace plan as soon as your Medicare coverage begins.

Medicare and Health Savings Accounts (HSAs)

If you have a Health Savings Account (HSA) through a high-deductible health plan, you can continue contributing to it until you enroll in Medicare. After you enroll in Medicare, you cannot make new contributions to your HSA, but you can still use the funds you’ve already saved for qualified medical expenses.

  • Best practice: Stop contributing to your HSA at least six months before enrolling in Medicare to avoid tax penalties. Medicare Part A coverage is often backdated up to six months, ensuring you won’t accidentally make contributions while covered by Medicare.

Key Mistake: Not Understanding How Medicare Works with Other Insurance

One of the most common Medicare mistakes is not understanding how Medicare interacts with your other insurance. Failing to coordinate your benefits properly can leave you without coverage when needed—or stuck paying hefty penalties.

Conclusion

When you have other health coverage, it’s essential to know whether Medicare will act as your primary or secondary payer and how to avoid gaps in coverage. You can make informed decisions and avoid costly mistakes by understanding how Medicare works with employer plans, COBRA, retiree benefits, TRICARE, VA healthcare, and Marketplace plans.

In the next chapter, we’ll explore how to make the right Medicare decision if you have a chronic condition and need specialized care.

Chapter 4: Chronic Conditions and Medicare Advantage Plans