Health Care in Retirement – Medicare Part A

In Part 2 of our Health Care in Retirement Series, we are going to review in-depth Medicare Part A.  To jump to any of the other parts of this series now, use the links below:

• Part 1: Health Care in Retirement – Options for Obtaining Health Insurance
• Part 2: Health Care in Retirement – Medicare Part A (Hospitalization)
• Part 3: Health Care in Retirement – Medicare Part B (Physician Services)
• Part 4: Health Care in Retirement – Medicare Part C (Medicare Advantage)
• Part 5: Health Care in Retirement – Medicare Part D (Prescription Drugs)
• Part 6: Health Care in Retirement – Medigap Plans (Medicare Supplement Insurance)

What is Medicare Part A?

Part A is coverage for hospitalization and care received at skilled nursing facilities, through home health care organizations, and for hospice services.  Part A is one of two components that combine to form what is known as Original Medicare.  Part B is the second component and is reviewed in Part 3 of our Health Care in Retirement Series.

How Much is the Monthly Premium?

If you have worked for at least 40 calendar quarters (10 years) and paid Medicare taxes during each of those quarters you will receive Part A for free.  If you have not satisfied these requirements, a monthly premium will apply.

In 2022, the premium ranges between $274 and $499 per individual per month.  The rate you pay depends on the number of credits have accrued.  Any premium owed is billed to you directly by the Social Security Administration.

Does Part A have a deductible or out-of-pocket maximum?

Yes and no.  In 2022, Medicare Part A has a deductible of $1,556 for each benefit period.

Unlike traditional health insurance plans, benefit periods are not based on a calendar year.  With Medicare, a benefit period begins when you’re admitted to a hospital or skilled nursing facility and ends once 60 days (100 days if admitted to a skilled nursing facility) have elapsed without you receiving any further care.

Therefore, in theory, an individual could experience an unlimited number of benefit periods within a given year, each resulting in $1,556 in out-of-pocket expenses to satisfy the benefit period deductible.  Because of this, many Original Medicare enrollees obtain a Medigap plan to limit their out-of-pocket costs under Part A.

Does Part A charge any copayments or coinsurance?

It depends.  Inpatient stays that last no more than 60 calendar days result in $0 copayments once the Part A deductible is satisfied.  However, longer stays do result in daily copayments.

In 2022, inpatient stays ranging between 61-90 calendar days result in $389 copayments per day.  For stays longer than 90 days, Medicare Part A affords beneficiaries 60 lifetime reserve days.  These reserve days limit the copayment rate on stays exceeding 90 calendar days to $778 per day.  Once these reserve days are depleted, you must pay all costs incurred after 90 days of inpatient care for the rest of your life.

When am I eligible to enroll in Part A?

Once you turn age 65, you are eligible for Medicare Part A coverage.  The Initial Enrollment Period is seven (7) months long and begins three (3) months prior to the month in which you turn 65.  It ends three (3) months after the month of your birth.

If you miss your Initial Enrollment Period, you can enroll in Part A between January 1 and March 31 during what is known as the General Enrollment Period.  Coverage obtained during this period will begin on July 1.

Suppose you miss the initial or general enrollment periods because you’re still employed and maintaining creditable coverage. In that case, you will be eligible for a Special Enrollment Period that will begin in the month you either stop working or lose your group coverage, whichever occurs first.  This enrollment period ends eight (8) months from the earlier of the two dates.  

Do I have to enroll in Part A?

It depends.  If you have not satisfied the work history requirement to receive premium-free Part A coverage, you must enroll in Part A during your Initial Enrollment Period in the year you turn 65.

However, if you (or your spouse) are still employed, and you maintain creditable coverage, which is defined as group health coverage through an employer with at least 20 employees, you are not required to sign up for Part A when you turn 65.

Instead, you can delay enrolling in Part A as long as you maintain creditable coverage through a qualifying group plan.  COBRA, retiree coverage, insurance obtained through the Veterans Administration, or individual coverage purchased through federal and state health exchanges do not qualify for this exemption.  Military members and their family, who are not on active duty but are covered by TRICARE must also enroll in Part A when eligible to avoid penalties.  The Medicare website has an online tool that can help you determine whether or not you need to sign up.

Are there penalties for not signing up for Part A?

Possibly.  If you have not satisfied the work history requirement to receive premium-free Part A coverage, you must enroll in Part A during your Initial Enrollment Period when you turn 65.  Failing to do so will result in a 10% late-enrollment penalty.  This penalty last for twice the number of years that you should have enrolled in Part A but didn’t.

If you are eligible for premium-free Part A coverage, the late enrollment penalties do not apply regardless of when you sign up.  However, others enrollment penalties and restrictions may apply if you fail to enroll in Medicare Parts B and D or Medigap when you are first eligible.