Many Americans are still working when they hit 65 and become eligible for Medicare. In fact, what used to be the retirement years, especially the earlier end of them, can look a lot like middle age. A study from Merrill Lynch and Age Wave found that 72% of workers over the age of 50 prefer to continue working well past the traditional retirement age of 65. In fact, 47% of those past retirement age are still in the workforce.

If you plan to continue working past 65, you have a potentially complicated situation to consider: healthcare.

If you currently have health insurance through a past or present employer – or through your spouse, if you're married – how do you make the policies work together? And what should you do when it becomes time to re-enroll in healthcare insurance at work, if your (or your spouse's) employer offers it?

First, you have to know how Medicare operates.

The Nuts and Bolts of Medicare

Medicare has four parts.Some are mandatory and others are optional, depending on your other healthcare coverage.

Part A. This segment covers hospital care. Also included are nursing care facilities and in-home hospice care. Most people receive Part A coverage free of charge at age 65.

Part B. Covers medical procedures and equipment, including doctor visits, surgery and preventative care. You may have to pay a monthly premium for Part B coverage. If you're enrolled in Medicare Part A, you're required to enroll in Part B if you don’t have “credible coverage” from another source – an employer or spouse, for example.

Part C. Also known as Medicare Advantage, Part C normally combines Parts A, B, and D into a program resembling an HMO. Private insurance companies administer Medicare Advantage.

Part D. This pays for prescription drugs and is also administered by private insurance companies.

(For an in-depth explanation of the four parts of Medicare, read Medicare 101: Do You Need All 4 Parts?)

Medicare Has Gaps

Traditional Medicare – defined as Parts A, B and D – has gaps in coverage. Part A has a $1,216 deductible, and Part B requires you to pay 20% of all expenses regardless of the total bill. Part D has the notorious "doughnut hole," which interrupts how drugs are paid for under Part D. You might reach a point when you have to pay as much as 72% of your prescription drug costs.

This all can add up to a sizable bill if you have a particularly bad health year. Because of these gaps, most people purchase additional insurance. There are two options: Medicare Supplement Insurance, also known as Medigap, is one choice. The other option to fill the gaps is a Medicare Advantage plan (Medicare Part C).

(For an in-depth explanation of Medigap and Medicare Advantage, read our article Medigap Vs. Medicare Advantage: Which Is Better?)

Should I Rely on Medicare or My Employer-Sponsored Plan?

Everybody over the age of 65 has to have health insurance – either through Medicare, a spouse or employer-sponsored coverage. Whether to stay with your employee plan or transition to a Medigap or Medicare Advantage plan is a matter of comparison. Compare deductibles, the maximum you would have to pay out of pocket and other plan features. Which plan gives you the best coverage for the best price?

It’s not just about the premiums. If your current doctors don't take Medicare, and you want to stay with them, stay with your employer-sponsored plan as long as they allow it.

Should you decide to stay with your employer plan, even if you are enrolled in Medicare, Part A, check with Medicare to see if you can delay enrolling in Part B. You may be able to hold off on paying Part B premiums because you are covered by employer-sponsored health insurance.

If you are married, check how this will affect your spouse. If you give up your employer-sponsored coverage, you and your spouse will have to pay for separate Medicare policies. If your spouse is under 65, he or she will  have to find private coverage.

Finally, once you reach the age of 65, your employer or its insurance company may require you to file for Medicare. Check with your employer and/or insurer prior to turning 65 to see if your coverage will change.

Step by Step

Here’s how you might go about comparing plans:

Step 1: Talk to your employer to see if your current insurance will change at age 65.

Step 2: Gather all documents pertaining to your employer-sponsored insurance.

Step 3: Find a comparable Medicare plan – either traditional Medicare A, B, D plus Medigap, or a Medicare Advantage plan.

Step 4: Figure out which plan is a better value by comparing prices and benefits.

Step 5: Consider other factors, such as spousal insurance, whether you'd have to change your doctors, etc.

Step 6: Get a second opinion from a trusted insurance agent or consultant.

Who Pays First?

Harriet Hoffman, an independent consultant in New York City and owner of Make the Right Choice: Your Medicare & Social Security Benefits, explains that if more than 20 employees work for a company, the group health plan pays first. Medicare serves as a secondary policy and may pay all or a portion of the remaining expenses.

For companies with fewer than 20 employees, Medicare is probably the primary insurer, which means you may want to switch doctors if yours don't take Medicare.

Talk to your employer to see who the primary insurer is in your case. For more detailed information about who pays first, consult “Your Guide to Who Pays First” at

Is Medicare as Bad as People Believe?

According to Hoffman, not at all. "Medicare is the reason why people over 65 are less likely to live in poverty than any other age group." She says that doctors, especially in larger population areas, aren't ditching Medicare patients any faster than they are dropping traditional insurance plans, and Medicare networks can easily be as large or larger than those of some private insurers' networks.

According to Joseph Graves, insurance agent and founder of the firm I Hate Buying Insurance, Medicare is a seamless, national network that may give patients access to some specialty hospitals that private insurance does not.

The Bottom Line

The older you get, the higher your chances of having medical issues. If you opt for Medicare instead of your employer plan – or work in a small company where Medicare becomes your primary insurer – be sure to fill in the gaps. Compare one of the Medicare Advantage or Medigap policies to your company-sponsored insurance plan to see which is the best deal for you.

“If the employee is having to pay a large share of their company insurance premium or has a large deductible, Medicare could be a less expensive option,” says Hoffman. “Otherwise, the employee would usually be better off remaining on the company plan and deferring enrollment in Part B until they leave the employer.”

Ask your insurance agent or independent consultant to help you compare and make the right choice based on your specific needs.

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