Health Insurance 101

Paul is currently receiving Social Security disability payments.  He is eligible for Medicare, but has not yet applied because he is still eligible for covering under my employer’s group policy.  Two questions:  when will he need to apply for Medicare, and what will the premiums be.

For the “when to apply” question I consulted http://www.medicare.gov/Publications/Pubs/pdf/11219.pdf
If I’m reading this correctly, Paul can apply for Medicare parts A (Hospital Insurance) and B (Medical Insurance) without penalty during the eight months starting when his coverage through my employment terminates. 

According to https://questions.medicare.gov/app/answers/detail/a_id/2306/~/2011-part-b-premium-amounts-for-persons-with-higher-income-levels, Paul’s monthly Medicare Part B premium would be $161.50 in 2011. 

From what I have read, it appears that the Medicare Supplement Plan my company offers retirees eligible for Medicare replaces Medicare Parts C and D.  It also appears to be pretty good:

• The plan supplements coverage for expenses of health care services and supplies covered under Medicare Part A and Part B. Medicare Part A and Part B provide your primary health care coverage.
• The plan has a $500 annual deductible per person, which is also the annual out-of pocket maximum. This means that $500 per person is the most you pay out of pocket in a calendar year for services and supplies covered by Medicare Part A and Part B.
• Prescription drugs are covered separately. Expenses paid for prescription drugs (including copays) are not applied to the $500 deductible or the $500 out-of-pocket maximum.   However, prescription drugs ARE covered J

So our monthly expense for health insurance (not health care – just health insurance) will be approximately $1,197.00.  That’s based on the approximate figures of $667 per month for medical/dental retiree coverage for me and $358.50 per month for Medicare Supplemental Insurance for Paul, added to the $161.50 Part B premium. 

That’s approximately $15,000 a year.  We can only assume the costs will rise – both next year when this really happens, and every year after that.  Paul has challenged me to come up with a way to earn that $15,000 during retirement.  The gauntlet has been thrown.