When you turn 65 you need to compare and decide between Medicare and your employer group coverage. If your employer plan is better, then you can delay Part B and avoid the premium. But what about Premium-free Part A? Enrolling in Part A can be a good option for many people, but not all. Medicare Part A becomes second payer to the employer group plan and helps if you end up hospitalized. Depending on your group coverage, this may reduce your maximum out-of-pocket costs. You should understand how Part A coordinates benefits with your group health plan to see if it will help. You also need to consider a couple scenarios when you should not enroll in Part A.
In this article, we cover Medicare Part A, when to enroll, and how benefits work after your group coverage.
Understanding Medicare Part A
Medicare Part A is hospital coverage. It helps cover inpatient hospital stays, skilled nursing facility care following a hospital stay, and hospice services. Most people qualify for premium-free Part A because they or their spouse paid Medicare payroll taxes for at least 10 years. Since there is typically no monthly premium, many individuals choose to enroll in Part A once eligible even if they delay Part B while still working and covered by creditable employer group coverage. At this point, Medicare Part A pays second to your employer group plan if the coverage qualifies as creditable.
You should not automatically enroll in Part A just because it is premium-free. This will depend on a few factors, including whether you contribute to a Health Savings Account, or if you have a younger spouse that will need extended COBRA when you retire. It is best to speak with a licensed agent to get help with your specific scenario.
Important note: Not all employer plans are considered creditable to delay Part B. Find out if your plan is creditable in our previous blog, Choosing Between Medicare and Employer Plan.
Part A Coordination of Benefits
If you have a creditable group health plan (GHP) and Medicare Part A, then you have 2 separate plans for hospital coverage. Your group health plan (GHP) pays first, and Medicare pays second. This means that your GHP is the primary insurance, it determines claims and pays first. Medicare is a backup insurance and would pay second, per Medicare Part A deductibles and coinsurance. This doesn’t always mean that Medicare pays something in every scenario. It also doesn’t mean that you will have zero obligation if you have a hospital stay.
Your obligation depends on the allowable charges, whether you met your Part A deductible, and any remaining unpaid balance that falls under Part A. The group health plan processes the claim first, and Medicare Part A processes it second. Your group health plan will determine their allowable charges, and how much you and the plan will pay. Medicare will also determine their own allowable charges and if the deductible has been met. Medical charges that would normally meet the beneficiary’s Part A deductibles if it were primary, are credited to those deductibles even if the expenses are reimbursed by a GHP. This is true even if the GHP paid the entire bill and there is nothing left to be paid by Medicare. This is why you always want to give the hospital provider your GHP insurance and your Medicare Part A card.
Payments made to the hospital are credited to the Part A deductible based on Medicare’s fee schedule, not the GHP’s fee schedule. These amounts may be different, which is why it is difficult to try and calculate on your own. Once your Part A deductible has been met, Medicare Part A will kick in and help pay as secondary payer. It will calculate using Medicare allowable charges after the GHP paid portion. If the GHP payment is less than the Part A deductibles, the beneficiary may be responsible for paying the remainder of any unmet Medicare deductible first.
Example with Medicare Part A as Second Payer to Group Health Plan:
Your group health plan has a $3,000 deductible, and a 20% coinsurance. After a 2 day stay in the hospital, the hospital bills $4,500 in allowable charges to the GHP. For simplicity’s sake, we will assume Medicare allowed charges are also $4,500. In 2026, the Medicare deductible is $1736. After this deductible, the copay is $0 for the first 60-days in the hospital.
First, breakdown how much your GHP pays:
Allowable Charges: $4,500
GHP pays 80% after deductible: $1,200 = (4500-3000)*80%
Balance: $4,500 – $1,200 = $3,300
Next, calculate Medicare allowable
Allowed charges: $4,500
Medicare Deductible: $1,736
Medicare allowed after deductible: $2,764
Finally, calculate beneficiary obligation:
Allowed Charges: $4,500
Primary pays: $1,200
Medicare pays: $2,764
Beneficiary pays: $536
In this scenario, the beneficiary pays $536 when they have Part A, instead of $3,300 if they didn’t.
For inpatient hospital stays, the combined payment by the primary payer and Medicare cannot exceed Medicare’s recognized payment amount. As you can see, in this situation Part A will benefit you as a secondary payer. This will generally depend on the coverage you have from your primary Group Health Plan.
Should you take Medicare Part A to reduce your hospital costs?
Like with everything Medicare related, the answer depends on your situation. There are a couple of scenarios when you may not want to enroll in Part A if you are still actively working and covered employer group health plan.
- Health Savings Account Contributions (HSA): If you contribute to an HSA, then you cannot have Part A and continue making contributions. Medicare does not allow you to contribute to an HSA once you have any part of Medicare.
- Younger Spouse: Will your younger spouse need more than 18 months of COBRA after you retire? If so, then you may want to hold off on joining Part A. Many people have a younger spouse covered by their Group Health Plan when they retire. Enrollment in Part A may affect the spouse’s duration on COBRA. COBRA allows an extra 18 months (36 total) for younger spouses when you enroll in Medicare. But the clock starts ticking on the extra 18 months of COBRA when joining any part of Medicare. If you enroll in Part A a year before you retire, then your spouse has a year less of the 36 month COBRA. You don’t want to enroll in Part A too early in this situation.
Final Thoughts
It is important to understand how Medicare Part A works with employer group coverage. If you have creditable group health plan while still actively working, then Medicare Part A will be secondary. Because most people qualify for premium-free Part A, enrolling in it may reduce your out-of-pocket expenses during a hospital stay. However, there are other situations to consider before you run off and enroll in Part A. Always make sure you speak with a licensed agent to help figure out what you should or shouldn’t do.
