CHAPTER
5

Qualifying for Medicare

In This Chapter

• Meeting criteria for Medicare by age
• When taxes count and when they don’t
• Medical conditions that qualify for Medicare
• The long road for disabilities
• What to do when you are denied Medicare

One of the keys to gaining access to health care in the United States is knowing when you are eligible. Private insurance policies are always available, but they can be expensive. Too often the costs are not feasible for individuals and families. For this reason, many people opt out of health care. In 2010, 49 million people were without health insurance according to the 2011 Current Population Survey conducted by the U.S. government.

The reality is that a single health crisis can break the bank, costing hundreds to thousands of dollars in some cases. This is all the more reason why people need to educate themselves about their options to protect their health and longevity, both medically and financially. The Affordable Care Act has proffered health-care opportunities to families with limited resources, but Medicare remains a key tenant for those who qualify.

When Age Is Not Just a Number

No one likes to think of themselves as getting older but it’s one of those facts of life that cannot be denied. As we age, our bodies change. Our hearts are more likely to slow down and our arteries tend to get stiffer, losing some of their elasticity. This can increase the risk of high blood pressure and heart disease. However, many of these things can also happen in younger people who are predisposed to these conditions based on their genetics or whose lifestyles may be unhealthy.

Other medical issues that may worsen with age include the following:

• Bone thinning
• Constipation
• Dry mouth
• Muscle weakness
• Hearing loss
• Memory changes
• Receding gums
• Skin fragility with thinning and increased bruising
• Urinary problems (enlarged prostates in men, incontinence in women who have given birth to children or have had hysterectomies, etc.)
• Vision changes (cataracts, macular degeneration, etc.)

Many of these changes are associated with medications used to treat a number of medical conditions, and many others are triggered by nutritional deficiencies caused by not eating the proper balance of fiber, protein, or vitamins. That said, the majority of these changes are a consequence of wear and tear on our bodies over time. Our bodies do not rejuvenate as well as they did when our cells were younger, making us more prone to disease and illness. Research continues to explore ways to slow the aging process. Alas, we do not have the answer just yet.

TIP

While you may always remain young at heart, your age can provide you benefits. Not only does your age gain you life experience but it also offers you opportunities to save. You may become eligible for many services, most importantly Medicare. Make the most of it.

This does not mean you have to be a victim to age. The best way to minimize these changes is to life a healthy lifestyle with regular activity, a healthy balanced diet, and engagement in social activities to keep the mind sharp. How you take care of your body will decide how well it feels and for how long. You may not be able to stop the aging process but there are things you can do to slow it down.

Hitting Age 65

There comes a time when you will be considered a senior citizen and that unwanted “e” word, elderly, sneaks its way into the dialogue. There are different definitions for what it means to be a senior citizen. Colloquially, a senior citizen may refer to someone who is retired. I know many people who have worked into their 70s and they would love that definition! Long live their youth! Does this also mean you never become a senior citizen if you never worked in a paying job? What about all those stay-at-home parents out there who have the best and hardest job in the world?

Clearly, that definition is insufficient because it cannot be standardized for the purposes of offering government support. Worldwide, it becomes a bigger conundrum. With different life expectancies in developing versus modernized countries, how can we set an acceptable social definition for old age?

The United Nations has designated old age as anyone living more than 60 years. The World Health Organization has set their old age definition at 50 years for those in Africa. As of this publication, the United States government recognizes the magic number to be 65. The possibility of extending the Medicare eligibility age to 67 years old remains a hot topic and that will be discussed in a later chapter.

Age is more than chronology. Functionality plays a major role. In our country, the odds of having reduced functionality after age 65 are considered higher, and federally funded support services are deemed appropriate. Up until age 65, gainful employment is likely for most adults, statistically speaking. With gainful employment, in theory, comes the ability to pay for health care. To this end, Americans 65 years and older are deemed eligible for Medicare.

Enrollment Prior to 65

It is possible for those younger than 65 to gain access to Medicare. Their eligibility is based on medical conditions or disabilities that are expected to have long-term consequences.

Similar to the aging principles discussed above, specific medical problems and disabilities can limit your functionality, deeming it a challenge to earn wages or finance your own health care. Conditions recognized for Medicare eligibility include end-stage renal disease and amyotrophic lateral sclerosis, among others. Eligibility for Social Security Disability or Railroad Retirement Board benefits may also entitle you to Medicare.

Medicare Tax Dollars

It is a common misunderstanding that you have to pay Medicare payroll taxes in order to be eligible for the program. Generally speaking, anyone over 65 years old who is a United States citizen or permanent legal resident is eligible for Medicare, no matter what. Whether or not you paid Medicare payroll taxes will determine how much you pay for the program, not your eligibility. For those who worked more than 40 quarters in a Medicare-taxed job, Medicare Part A is free. Those who worked a lesser amount or not at all will pay a monthly premium. This will be addressed in detail in Chapter 10.

TIP

To be eligible for Medicare by age 65, you must first be either a United States citizen or a legal resident of the country for five consecutive years. Legal residency must be established and actively ongoing before you can sign up for Part B.

Noncitizens who have paid sufficient Social Security taxes or who have participated in the U.S. military may be eligible for Social Security benefits as well. If they are disabled, they can then become eligible for Medicare after 25 months of receiving SSDI benefits.

Those who meet Medicare criteria based on underlying medical conditions or disabilities may need to meet additional requirements. Forty quarters of employment are required to achieve eligibility based on end-stage renal disease.

Qualifying Under a Spouse

Apparently, who we marry makes a difference to the federal government. If your spouse meets Medicare eligibility requirements, you may too. It depends on whether you are currently married, widowed, or divorced and whether or not you remain single or remarried.

If you are 65 years old and have not worked 40 quarters of Medicare-taxed employment, you could still get Medicare Part A for free if your spouse worked the mandatory amount of time, assuming you have been married to that person for at least one year. Your spouse must be at least 62 years old for this to apply.

You are also eligible if you remain single after divorce or become widowed. Once you remarry, if your former spouse is alive, you can no longer benefit from that spouse’s record. If your former spouse is deceased and you remarried after you were 60 years of age, you could still be eligible for benefits based on your former spouse’s record.

Widowed status for Medicare purposes only counts if you were married for at least nine months and divorced status only if you were married for 10 years or longer.

Remarriages can be tricky for Medicare purposes. If your second marriage dissolves for any reason, be it divorce or death, you may then be eligible to use either spouse’s record to meet eligibility requirements.

Different rules may apply for those in domestic partnerships or same-sex marriages. The Defense of Marriage Act (DOMA) will be discussed in Chapter 6.

Qualifying Under Disability

When Medicare was enacted in 1965, the program was limited to senior citizens. In 1972, Medicare underwent the first of a series of expansions to cover people with certain diseases and long-term disabilities, regardless of their age. While many of us are likely to develop health problems as we get older, people at any age may be at risk for medical problems based on genetics or plain old bad luck. It seems morally fitting to address the needs of those with physical and mental handicaps who would otherwise have difficulty accessing health-care coverage.

If you have a long-term disability, you may qualify for Social Security Disability Insurance (SSDI) benefits. When you do, this may also make you eligible for Medicare, even if you’re under age 65. Likewise, if you qualify for Railroad Retirement Board (RRB) benefits, a separate social security system specific to American railroad employees and their families, you may also meet Medicare’s criteria for coverage.

Kidney Disease

Kidney disease is all too common in our country. The United States Census Bureau estimates that 1 in 10 Americans has some degree of kidney impairment. For some people, the kidneys only have temporary deficiencies that recover to normal, or at least functioning, levels. For others the kidneys continue to struggle and even fail, unable to properly filter the blood and flush toxins out of the body. This condition could be life threatening.

When kidney failure cannot be reversed, it is called end-stage renal disease (ESRD). People with ESRD are often started on dialysis or put on the National Organ Transplant Waiting List. In 2011 alone, 113,136 Americans were treated for ESRD. In August 2014, more than 100,000 were on the waiting list for a kidney transplant.

Medicare recognizes ESRD to be a severe disease warranting coverage regardless of someone’s age. In order to be eligible for Medicare coverage, as an ESRD patient you must also meet two other criteria:

1. You must satisfy eligibility requirements for SSDI or RRB benefits.
2. You, your spouse, or your guardian (if you are a dependent) must have paid Medicare taxes into the system for at least 40 quarters as your employment duration.

DEFINITION

Medicare defines employment duration based on quarters worked rather than years. There are three months in a quarter and four quarters in one year.

If you have ESRD, these conditions qualify you for Medicare. There is no need to go through an application process and multiple waiting periods that those with certain other disabilities are subject to. You can apply for Medicare immediately and receive the health care that you need. Benefits begin three months after you begin dialysis treatment.

ALS

In 2000, Congress passed legislation to add Amyotrophic Lateral Sclerosis (ALS) to Medicare’s list of covered medical conditions. ALS is less common than ESRD but the disease is rapidly progressive and life threatening. Commonly referred to as Lou Gehrig’s Disease, ALS is a devastating neurologic condition that attacks nerves in the brain and spine. As the nerves break down and degenerate, muscles in the body weaken, ultimately resulting in paralysis and an inability to breathe. There is no cure for the condition though studies are underway.

The ALS Association reports that on average 30,000 United States citizens have ALS at any given time and 5,600 new diagnoses are made every year. Similar to ESRD, if you are suffering from ALS you would qualify for Medicare coverage when you demonstrate eligibility for SSDI or RRB benefits, without the application process and multiple waiting periods that those with certain other disabilities must undergo.

Other Disabilities

Kidney disease and ALS are specifically mentioned in the Medicare legislation, but that does not mean that other disabilities are not given fair consideration. Disability can happen for a number of other reasons, both physical and mental. The government requires that a series of steps be taken to demonstrate the extent of a disability before it will consider appropriateness for Medicare coverage. If you have other qualifying disabilities, in addition to demonstrating eligibility for SSDI or RRB benefits, you must wait for the actual approval of your application and subsequent waiting period before you can apply for Medicare.

Applying for Disability Benefits

The first step requires completion of an application for SSDI. It is a cumbersome process that requires you to complete paperwork explaining and justifying your functional limitations. In addition, you must be evaluated by a physician. Your doctor needs to document the nature of your condition, report physical examination findings, and provide an expectation of how long your disability will last. An anticipated illness duration of more than 12 months is necessary to meet eligibility criteria.

Your application must then be forwarded to the Social Security Administration (SSA) for approval. Unfortunately, the SSA process can be very slow, taking anywhere from three to six months to respond yes or no to an application. SSA’s Compassionate Allowances Program lists 225 medical conditions that may hasten consideration of a case. The conditions on this list tend to be more aggressive and often have poor prognoses. Examples of conditions on this list include acute leukemia, early-onset Alzheimer’s disease, malignant multiple sclerosis, and pancreatic cancer. The complete list can be found at ssa.gov/compassionateallowances/conditions.htm.

DID YOU KNOW?

Sixty-five percent of initial SSDI applications are denied by the Social Security administration. This often requires applicants to appeal their cases to the courts.

Once your application is approved, SSDI benefits do not begin immediately. There is a five-month waiting period before they take effect. During this time, you remain ineligible for Medicare. In the meantime, it is important to have other health insurance coverage if possible to make sure you have access to the care you need.

Next comes a second waiting period. Medicare eligibility is not granted until you have received SSDI benefits for at least 25 months (24-month waiting period with an application for Medicare in the twenty-fifth month). Lobbyists are actively trying to decrease or discontinue this second Medicare waiting period, stating that it is leaving people in need without access to health care for years at a time.

If SSDI is discontinued for any reason, your Medicare eligibility is also lost. You may become eligible for Medicare in the future if you meet disability criteria and again undertake the application process. Having gone through the SSA process once does not necessarily mean that your second application will be processed at a faster rate. Once eligibility age is reached, regardless of disability status, you qualify for Medicare.

The application process for RRB disability benefits is a little more streamlined. Necessary forms and documents regarding your medical condition, including medical examination, are submitted as with SSDI. The expectation of a disability lasting longer than 12 months remains. Within 100 days, a decision will be made regarding your application. If approved, there is no five-month waiting period before you receive those benefits, but the 25-month waiting period remains before you will be eligible for Medicare, unless you have ESRD or ALS as discussed previously.

Returning to Work with Disabilities

You may want to return to work even if you have a disability. This would suggest that your disability is not severe enough to warrant continuation of your SSDI benefits. Without ongoing SSDI benefits, you lose your eligibility for Medicare. How do you proceed?

The government does not want to discourage people from seeking gainful employment. In fact, it wants to do the exact opposite. It aims to encourage people to become independent so that they can rely less on cash benefit programs from the government over time. For this reason, the Ticket to Work and Work Incentives Improvements Act (TWWIIA) was enacted in 1999.

Tickets are awarded to qualifying SSDI beneficiaries who apply to the program between the ages of 18 and 64 years of age. These tickets allow them to access training services that may allow them to reenter the work force. The tickets are essentially used as vouchers to purchase training.

The Social Security Administration establishes approved employment networks (ENs) that will provide training and work to those requesting entry into the Ticket to Work program. These ENs may include vocational rehabilitation programs and other employment support services. These can range from state to local agencies as well as for-profit and non-profit agencies, including colleges and universities.

As an enrollee, you work together with an EN to set an individual work plan that will provide the skills that will most assist your return to work in light of your disability. You may work with one EN at a time but may transition to another EN as needed to garner additional skills and resources. An individual EN is not required to provide every type of service.

ROUND TABLE

Thomas is struggling with a decision. After sustaining an injury from a motor vehicle accident several years ago, he has undergone repeated surgeries and suffers from tremors in his arms and legs, chronic pain, and difficulty walking. He wants to return to work, but he is uncertain if his condition will allow him to be successful. He is afraid to lose his SSDI and Medicare benefits. As long as he applies and is accepted into the Ticket to Work program offered through Social Security, he can continue his benefits while he explores his options.

If you just jumped into training and started working, you would lose eligibility to SSDI and therefore Medicare. If after you began employment you realized that your disability proved to be too limiting to sustain meaningful work, you would be stuck between a rock and a hard place. It would take another application for SSDI with the waiting periods of 5 months for SSDI benefits and another 24 months for Medicare before your benefits are restored to their previous level. The Ticket to Work program allows you to continue to receive benefits while you establish and test your skills.

The Ticket to Work program is divided into two phases. The first of these is the trial work period (TWP), which spans nine months; these months do not need to be consecutive. You may be eligible for a second trial work period if you work less than nine months over a five year period. During your TWP, you continue to receive SSDI benefits and Medicare. At the end of the period, it will be determined if you have achieved substantial gainful activity (SGA). If your gross income is more than the designated dollar amount set for SGA, your benefits will be discontinued.

If you are found to still have a disability after your TWP, you may then enter the second phase of the program known as the extended period of eligibility (EPE). The EPE extends your SSDI benefits an additional 36 months and your Medicare eligibility for 93 months. For months when you earn more than the SGA amount, you will not receive SSDI benefits; for those you don’t, you will receive a benefit check. There are few exceptions to the rule.

The first Tickets to Work were provided to beneficiaries in February 2002 across 13 states and the program was extended in January 2003 to all states in addition to the U.S. territories of American Samoa, Guam, Northern Marianas, Puerto Rico, and U.S. Virgin Islands. It has provided a tremendous resource to disabled individuals to encourage them toward a road of financial independence.

Does Age Matter?

Medicare offers coverage for approved disabilities regardless of age but some limitations apply. Once you meet Medicare eligibility based on age, you may have additional options, including access to Medigap plans. If you had been penalized with Medicare late fees, those late fees could be discontinued once you reach 65 years old. These issues will be addressed in more detail in subsequent chapters.

Meeting Plan Requirements

The good news is that there are no plan requirements for Original Medicare outside of the eligibility requirements listed previously. The optional components of Medicare—Part C and Part D—as well as supplemental Medigap insurance, however, have more leeway to set requirements since they are run by private companies.

Pre-existing conditions is a cringe-worthy phrase that makes you shift in your chair for the ethical issues surrounding it. For private insurance, this is capitalism at work. If you have a pre-existing medical condition, you will spend more health-care dollars and cost the company more than someone without those conditions. Insurance companies in the past could charge you more in fees to make up for anticipated lost profits. In some cases, insurers would even refuse to cover someone if they thought their health-care expenses would be too high for their company goals. This, unfortunately, decreased affordable health-care access to those who needed it most.

The Affordable Care Act (ACA) turned that all around, stating that an insurance company could not deny coverage to people for pre-existing conditions nor could they increase costs to beneficiaries for that reason. This took effect in 2010 for children and subsequently for adults as of January 1, 2014.

Still, there are always exceptions—so called “grandfathered plans.” Plans that were in existence prior to passage of the law on March 23, 2010, could continue as they had pre-Obamacare as long as they did not make considerable changes to what they covered. Such changes would signify the creation of a new plan that would then have to meet ACA standards.

TIP

If you have a grandfathered plan, you may need to change your health-care plan in 2015 to one that meets the rules and regulations set by the Affordable Care Act. Consult your insurance agent to see if you fall into this category to avoid missing enrollment periods that could otherwise result in late fees.

If you are enrolled in a grandfathered plan, you could still be denied coverage or charged more for pre-existing conditions. The government mandates that these plans lose their grandfathered status in 2015, meaning that the insurance companies will have to add coverage for those conditions or otherwise discontinue the plan altogether.

Applying for optional components of Medicare or Medigap may cost you more money if done outside designated enrollment periods.

What to Do If You Don’t Qualify

Not everyone will qualify for Medicare and that could leave some in a costly bind. As we discussed, private insurance can be expensive. When the chips are down, what other options do you have to make ends meet? Once you turn 65, you will become eligible as long as you meet residency requirements. Here are some tips to get you through until that time.

Hopping onto Your Spouse’s Coverage

If you are married and do not qualify for Medicare benefits, your best option may be to make the most out of your spouse’s coverage. That is, if they have some and it’s under a private insurance plan. If they are on Medicare, you are out of luck.

Insurance plans usually have an open enrollment period when a beneficiary is allowed to make changes to their coverage, including adding spouses or dependents to their plan. This is when you can get in on the action, no questions asked.

If you want to sign up for insurance outside of that open enrollment period, you need to justify why to the insurance company. For example, if you just lost your job and subsequently your health insurance, this would be considered a life-changing event that most insurers would allow for immediate sign-up. However, if you had other insurance and wanted to change to your spouse’s coverage for a better deal, that would not be enough to qualify you for coverage outside of open enrollment, at least for most companies. Some insurers may allow you to sign up but at higher rates. Essentially, there needs to be some “qualifying life event” that takes place to warrant adding you to your spouse’s health insurance outside of the open enrollment period and at the same cost.

Extending Employee Benefits with COBRA

Thanks to the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986, you may be eligible for health insurance through your employer when you leave that job. If you worked for a company that employed more than 20 full-time equivalent employees, COBRA mandates that an employer provide insurance coverage to those who left their position for qualifying reasons. The coverage offered must be the same as that offered to you while you were actively employed. This coverage extends to the former employee, their spouse, and their dependents for a limited amount of time.

You have 60 days to decide whether or not to sign up for COBRA coverage. This is known as an election period. If you initially decline COBRA benefits for you and your family, you can always change your mind and sign up for coverage as long as you do so within this election period. Coverage under COBRA may extend as long as 36 months.

CAUTION

A company must employ the equivalent of 20 full-time employees to be mandated to offer COBRA coverage. Part-time employees will count toward that number based on their percentage of full-time employment. For smaller companies, this distinction is significant. Take the example of a company that employs 28 people with some of them being part-time. This could be 10 full-time employees plus 18 half-time employees (equal to 9 full-time employees). This would equate to 19 full-time employees. This company would not have to offer you COBRA coverage, but a company that employed those 18 employees at three-quarters employment would cross that threshold of 20 full-time equivalent employees. Know your rights.

Insurance offered by your employer is usually cheaper than insurance you could purchase on your own because your employer has negotiated a group rate with the insurance company. Also, as part of your employment contract, your employer may also pay a percentage of the cost toward your health-care expenses when you are actively working.

When you stop working, your employer is required to offer you COBRA insurance benefits at the group rate, but they do not have to contribute the dollar amount they had paid on your behalf when you were actively working. For this reason, the costs of COBRA insurance are often considerably higher than what you paid when you were on the job. Still, the expenses are lower than they would otherwise be if you were paying for that same insurance plan on your own without a group rate.

Medicare eligibility affects the timeline for COBRA benefits. Different scenarios that could qualify you or disqualify you from COBRA benefits will be discussed in Chapter 14.

Participating in the Health-Care Exchange

People who had not previously been able to afford health insurance may now have options based on health-care exchanges developed by the Affordable Care Act. These health-care programs are run by participating states who accept subsidies from the federal government.

The ultimate goal of the ACA is to improve access to care for all Americans. In fact, Americans who did not have health coverage by March 31, 2014 are subjected to a monthly fine. Businesses with more than 100 full-time equivalent employees were able to offer these exchange plans to their workers for health-care coverage after November 2014 and those with less than 25 full-time equivalent employees may even get tax breaks for offering health-care coverage.

The ACA does not come free. In order to generate funds for the program, the government will increase taxes on small businesses, in particular those earning more than $250,000 per year and those employing more than 50 full-time equivalent employees, if they do not offer health insurance to their employees by January 1, 2016. Insurance companies also face increased taxation. Budget cuts to other government programs in addition to raising Medicare Part A premiums also assist in funding the ACA.

Using Your Retiree Health Benefits

Employers may offer retiree health benefits, though this trend is on the decline. Larger companies, usually those employing 200 full-time equivalent employees or more, are more likely to contribute to plans than smaller companies. In 1988, 66 percent of these larger companies offered the benefit, but the number decreased to 29 percent in 2013, according to the Henry J. Kaiser Family Foundation.

Retiree health plans fall into two categories, those offering benefits before 65 years old and those after. Pre-65 plans often include the same level of coverage benefits as active employees, whereas those tailored to retirees older than 65 years of age tend to be supplements to Medicare. On average, pre-65 retiree health plans cost employers twice as much as supplemental plans.

Employer-health plans may even negotiate with private insurance companies offering Medicare Advantage and Medicare Part D plans to group rates for reduced premiums. The number of Medicare Advantage group plans increased from 1.7 million in 2008 to 2.5 million in 2013. Health reimbursement accounts may also be used to fund retiree benefits. In this case, funds are set aside for the employee to use for nongroup based coverage.

How are these plans funded? It depends. Premium costs may be completely covered by the employer, shared between the employee and the retiree, or directed in full to the retiree. It depends on the contractual agreements made. Make sure you understand where your plan falls if you will be relying on a retiree plan now or in the future.

More and more employers are tightening restrictions on their retiree benefit plans, e.g., increasing eligibility requirements or capping how much they will pay, and some have stopped offering them altogether. In this time of health-care reform, they may be too expensive for some employers to maintain into your retirement years.

Benefitting from Your Union Dues

Depending on your job, you may have had opportunity to join a labor union. Unions are organizations that represent employees in different industries, examples being the American Federation of Teachers and the United Mine Workers of America. Using collective bargaining, unions aim to improve wages and benefits for their members and also provide resources to them during times of labor disputes. Benefits sometimes include pensions that pay a fixed income to members upon retirement. These services come at the expense of union dues.

Health benefits have been negotiated between unions and employers for decades. According to the American Federation of Labor and Congress of Industrial Organizations (AFL–CIO), 85 percent of union members nationwide have health care access compared to only 54 percent of nonunion workers. The insurance plans negotiated by unions tend to be less expensive, averaging 9 percent less for individuals and 15 percent less for families. If you have the opportunity to join a union, you may be able to spend less toward health-care costs.

This may be changing with passage of the Affordable Care Act, however. Because smaller employers do not have to offer coverage to part-time workers under the new regulations, a concerning trend has been seen where worker hours are being reduced. By working fewer hours, these union workers not only lose wages but also their important health-care benefits.

Employers may no longer be incentivized to offer employer-sponsored health plans if they can have their workers enroll in plans offered through ACA’s health-care exchanges for less money. It will be interesting to see what happens once contract negotiations expire.

The Least You Need to Know

• You qualify for Medicare only if you have U.S. citizenship or can supply proof of continuous legal residency of at least five years.
• To be eligible for Medicare, you must be age 65 or older, or you must meet certain disability criteria.
• People with certain medical conditions or disabilities have a waiting period of at least 25 months before being eligible for Medicare.
• You can return to work with a disability and keep your Medicare benefits if you participate in the Ticket to Work program.
• You may qualify for free Medicare Part A if your spouse or former spouse contributed 40 quarters in Medicare-taxed employment.
• You cannot be disqualified for coverage based on pre-existing conditions.
• If you do not qualify for Medicare, you may consider ACA’s health-care exchanges, COBRA, retiree health plans, and union-negotiated health benefits as alternatives.