Back in the early days of my career, a friend, in his early 30s, had a government job. Tom heckled me a bit because he was not paying Social Security taxes and, on top of that, he had a great retirement package, the Civil Service Retirement System (CSRS). This system provided retirement, disability, and survivor benefits for certain Federal employees. (Starting January 1, 1984, all newly hired Federal employees had to pay Social Security taxes. The CSRS was no longer an option for them.)
So, why the concern? The CSRS is a closed system so it does not cover new employees. However, there are still people under this system and, like Tom, they have gotten older. Tom is now 70 and has one big problem. Because he did not pay Social Security taxes, he is not eligible for premium-free Medicare Part A, hospital insurance.
There are ways that Tom, and other CSRS retirees, can get Part A.
- If they have a spouse who did pay Social Security taxes for 10 years (40 quarters), they can qualify for premium-free Part A. Unfortunately, Tom is single.
- Individuals, 65 and older, can purchase Part A if they meet citizenship and residency requirements. For those who worked and paid taxes for at least 30 quarters, the Part A monthly premium in 2019 is $240. Those with fewer than 30 quarters will pay $437 a month.
- If Tom had known he could purchase Part A, he should have enrolled during his Initial Enrollment Period. Because he missed that, his next opportunity would be during the General Enrollment Period, January 1-March 31, with coverage taking effect July 1. He will face a late enrollment penalty that can increase the monthly premium by 10 percent. The penalty amount likely will go up every year as the premium increases. The penalty applies for twice the number of years the individual could have had Part A but didn’t.
- Finally, one cannot buy Part A without having Part B, medical insurance.
For Tom and others who don’t qualify for premium-free Part A, getting this coverage will take some time and it will be far from free. If opting for Part A, Tom will pay $480.70 a month – the basic premium plus a late enrollment penalty. (In his case, the penalty will apply for 10 years.) He will also have to enroll in Part B, pay the monthly premium of $135.50, and an additional late enrollment penalty of $67.75 (five years late enrolling in Part B). That makes Tom’s monthly Medicare premiums a total of $684. And, if Tom is a higher-income beneficiary, he will pay even more for Part B.
What seemed like a great thing 40 years ago isn’t so great now.