Can you still get Medicare if you’re self-employed?

Did you know that what you do as a self-employed worker affects how much your Medicare coverage will cost once you reach 65?

Every American 65 or older is eligible for Medicare, but self-employed people may have to pay more, depending on how much they have paid into Medicare taxes. Keep reading to find out how to get your Medicare benefits — and how much it might cost you — if you’re self-employed.

A quick primer on Medicare

Medicare is the federal health insurance program for people 65 and older (as well as younger people with disabilities or end stage renal disease). The program has 4 parts that cover different services:

• Part A covers inpatient care in a hospital or skilled nursing facility, hospice care, and some home health care.
• Part B covers services such as doctor visits and care from other providers, outpatient care, home health care, durable medical equipment (such as wheelchairs), and many preventive services. (Together, Part A and Part B are also known as Original Medicare.)
• Part C, also called Medicare Advantage, is a private alternative to Medicare Parts A and B that can add benefits such as vision, dental, and hearing.
• Part D covers prescription medications and is included in most Medicare Advantage plans.

Medicare isn’t free. Each part comes with a premium (bill) that you must pay each month. For 2022, the Part A premium ranges from $0 to $499, and the Part B premium is $170.10 (or more depending on your income). Part C and D premiums vary by plan.

How Medicare taxes work if you’re self-employed

Medicare is funded in part by payroll taxes. If you’re self-employed, you must pay 15.3% of your net earnings to FICA (Federal Insurance Contributions Act). 2.9% of that goes to Medicare and 12.4% goes to Social Security.

Since you are your own boss, you’ll have to withhold (and pay) payroll taxes from your own paycheck. The IRS requires self-employed workers to make quarterly payments of their estimated taxes (on April 15, June 15, September 15 and January 15 if those dates don’t fall on weekends or holidays). If you don’t make those quarterly payments — or don’t pay enough — you may owe a penalty.

Can I get premium-free Medicare Part A if I’m self-employed?

While Medicare Part A can cost up to $499 per month, most people don’t have to pay anything for it. That’s because they’ve worked long enough to qualify for Social Security benefits (whether or not they’ve started receiving Social Security checks). This is likely true even if you’ve been self-employed for your whole career, as long as you have paid your Medicare and Social Security taxes correctly.

Here’s how it works: To qualify for Social Security and premium-free Medicare Part A, you must amass 40 work credits over at least 10 years of work. You receive one credit each time you earn a certain amount of money — $1,510 in 2022 — and you can receive up to 4 credits per year.

The number of credits you get has a big impact on your Medicare Part A premium. Here’s how it breaks down:

• If you earn fewer than 30 credits, your premium will be $499.
• If you earn 30 to 39 credits, it will be $274.
• If you earn 40 credits, it will be $0.

To collect those credits, you must not only earn the income, but you also have to report it on your Schedule C federal income tax return. “If you don’t do either, you may have to pay hundreds of dollars per month in premiums, which could be untenable in retirement,” says Caitlin Donovan. She’s senior director of public relations for the nonprofit National Patient Advocate Foundation. “We heartily recommend working with an accountant to make sure that you’re paying the right amount in self-employment taxes and at the right time,” Donovan says.

If you haven’t earned enough credits yourself, you may still qualify for premium-free Medicare Part A if your spouse has earned enough credits (even if you are now widowed or divorced).

Need help enrolling in Medicare? Call a licensed insurance agent at (800) 827-9990, or start shopping for plans today.

How to apply for Medicare

As with other workers, if you’re self-employed, you can enroll in Medicare a few different ways:

• You can enroll during the month you turn 65 or up to three months before or after that month. This seven-month period is called your Initial Enrollment Period (IEP).
• You can also enroll during the General Enrollment Period (GEP), which runs from January 1 to March 31 each year.
• You may qualify for a Special Enrollment Period (SEP) if, for example, you’ve been on your spouse’s group health plan, and they lose that coverage. You won’t qualify for an SEP if you lose coverage you purchased through the federal marketplace or if your COBRA or retiree coverage ends.

And if you don’t enroll during one of these periods, it may cost you. “Unfortunately, you can be financially penalized if you don’t enroll in Medicare at the right time,” Donovan says.

In fact, if you don’t apply for Medicare when you first become eligible, you’ll pay a late enrollment penalty. For Medicare Part A, assuming you have to pay a premium in the first place, the penalty is 10% and lasts twice the number of years you didn’t sign up. For Medicare Part B, it’s 10% for each 12-month period you didn’t sign up — and it never goes away.

A final word

“The most important thing about Medicare is understanding that you have to actively enroll, rather than assume you will be automatically enrolled,” says Donovan. “You still need to choose a plan, traditional or Medicare Advantage. If you choose a traditional plan, you still need to choose a supplemental and Part D plan.”

Donovan adds: “These choices will require time and planning. People should make sure that they set aside the time, because the right plan — within the deadline — will save you money over the course of your retirement.”

Get the help you need to sign up for Medicare on time. Call a licensed insurance agent at (800) 827-9990, or compare plans online page today.