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What Are My Options for Coverage in Retirement?

Q. I’m 58 and plan to retire at 60. As I worked outside the United States until 2004, I will have only 28 work credits toward Medicare at age 60. What are my options for medical coverage in retirement?

A.  You may want to think about working a little longer. Unless you’ll receive health benefits from an employer or union in retirement (and your question suggests that you won’t), you need to consider what coverage you can get before age 65 as well as after. Here are the options:

Before age 65:

  • Spousal benefits. If your spouse is working and has employer health insurance, you may be able to transfer to his or her plan for your coverage. Your spouse should contact the benefits administrator and add you to his/her coverage no later than 30 days after your own insurance ends. (Otherwise, you’d have to wait until the employer’s open enrollment period near the end of the year.)
  • Veterans' benefits. If you served in the armed forces, you may qualify for the health care program run by the Department of Veterans Affairs. This program does not cover dependents. For more information, go to the VA’s health benefits website or call the VA Health Benefits Service Center toll-free at 1-877-222-8387.
  • COBRA temporary insurance. If you receive health insurance from your current employer, you may qualify to have it extended after retirement. The COBRA law allows people who have left or lost a job to continue the same group insurance coverage for themselves and their families for up to 18 months by paying the full premiums. Go to the U.S. Department of Labor’s website for more information.
  • Individual health insurance. You can purchase nongroup insurance for yourself (and any dependents). This type of insurance is often costly, and you may be denied coverage or asked to pay a higher premium if you have preexisting health conditions. To find contact information for insurers in your area go to this government website. However, if you’ve had group or COBRA insurance for at least 18 months (and with no break in coverage longer than 63 days), you may have the right to buy individual insurance that doesn’t exclude or limit coverage for preexisting conditions. For general information, about this program, available under a law called HIPAA, go to the U.S. Department of Labor's guidance for consumers. For specific details on your rights, contact your state department of insurance.
  • Medicaid. If your income is limited, you may qualify for medical assistance under the federal-state Medicaid program. (This program has a different name in some states, such as MediCal in California, MassHealth in Massachusetts, and TennCare in Tennessee .) To qualify, you must meet income and saving limits required by your state. For a quick way to see if you’re eligible for this and other government programs, go to the Benefits Checkup website. For help in applying for Medicaid, contact a counselor at your state health insurance assistance program (SHIP). To find the phone number of your SHIP, click here or call 1-800-677-1116.

Age 65 or older:

  • You qualify for Medicare when you have 40 work credits (after paying Medicare payroll taxes during about 10 years of work). In your case, because you’ll chalk up 28 credits by age 60, you can meet full Medicare eligibility by working three more years. However, even if you retire at 63, you still can’t receive Medicare benefits before age 65 (unless you qualify at a younger age through disability, as explained here).
  • If you don’t have enough work credits at age 65, you can buy into Medicare by paying a premium for Part A hospital insurance, as explained here. With 28 work credits, you’d pay the premium’s full cost ($450 a month in 2011; and probably more in future years). If you work an extra six months to gain two more credits, making a total of 30 credits, the Part A premium is reduced significantly ($248 a month in 2011).
  • You can buy Medicare Part B insurance (for doctors and outpatient services) whether or not you have sufficient work credits, even if you’re not enrolled in Part A. For most people, the standard part B premium in 2011 is $115.40 a month, and more if your income is over a certain level. 
  • You can enroll in a Medicare Part D plan (prescription drug coverage), usually for an additional premium, if you have Part A or Part B insurance or both. (See our consumers' guide to part D.)
  • You have a guaranteed right to purchase private medigap supplementary insurance, for an additional premium, if you do so within six months of enrolling in Part B. Depending on the kind of policy, medigap insurance pays part or all of out-of-pocket expenses, such as deductibles and copayments (but not premiums), in the traditional Medicare program. But be aware that you can’t use medigap insurance if you’re enrolled in a private Medicare health plan (such as an HMO).

Patricia Barry is a senior editor at the AARP Bulletin.

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