Medicare Basics: Part II

When do I need to sign up for Medicare?

When do I need to sign up for Medicare? This is a question we get all the time, especially as retirement becomes more of a reality. In this post we will cover everything you need to know about when to enroll in Medicare, and what happens if you sign up for Medicare late (hint: it’s not good).

Recall, in Medicare Part I we covered the basics: what Medicare is, what services it covers, and how much it costs you each month.

But First - More History

When the Social Security and the Medicare systems were first created, the eligibility age was set at 65 simply because that was the prevailing retirement age of the time. Now flash-forward to the 21st century, where retirement at 65 is no longer the base case: according to a 2017 study by the Bureau of Labor Statistics, almost 25% of Baby Boomers plan to work past 65 (a number that has doubled since 1985). There is no sign of this trend slowing down.

Interestingly, the Social Security system has adjusted accordingly: the “normal” starting date for Social Security benefits has steadily increased from 65 to 67, depending on your birth year (i.e. late Boomers and beyond). Medicare, on the other hand, has yet to make any such adjustments.

What does this mean for near and future retirees: do you have to apply for Medicare at 65 no matter what? If not, then when? How do you do it? Not to add insult to injury, but the stakes are high: miss your enrollment deadline and you risk not only paying more for Medicare the rest of your life, you may also be denied certain types of supplemental coverage.

When do I need to apply for Medicare?

Asking when you have to sign up for Medicare is a bit of a loaded question. It’s not always black and white: when (or whether) you need to apply for Medicare depends mainly on two things: 1) whether or not you’re receiving Social Security benefits, and 2) whether you (or your spouse) are still working and have qualified employer health insurance.

To make things easy, simply use the following “Yes/No” chart to determine when you likely need to apply for Medicare. Note these are just rules of thumb and do not apply to everyone; consult a qualified professional if you have questions about your specific situation.

QUESTION 1
Did you start collecting Social Security more than 4 months before turning 65?
YES
  • Parts A & B – you will be automatically enrolled in Medicare Parts A and B starting the month you turn 65.
  • Part D and/or Medicare Advantage – you must apply within 3 months before the month you turn 65, and up to 3 months after. Remember, these plans are run by private insurance companies – not the government – so you can compare plans across several carriers to find the best deal. 
  • Medigap – you must apply within 6 months of being both 65 and enrolled in Part B if you want Medigap instead of Medicare Advantage (remember, you cannot have both – it is one or the other!). 
STOP HERE UNLESS:

If you’ve already started Social Security but plan to keep working past age 65 and will have qualified employer health insurance (see questions 3-5 for what counts as “qualified insurance”), you may not want or need Medicare yet. 

If this describes you, scroll down to the section entitled “Can I Postpone Medicare Even if I’m Already on Social Security?” to see your options. 

NO

If you have not started Social Security (or you started within four months of turning 65), you will not be automatically enrolled in Medicare. You will have to proactively apply for Medicare at some point in the future. The time frame in which you need to apply depends on your (or your spouse’s) employment status and the type of health insurance you currently have (if any).

GO TO QUESTION 2
QUESTION 2
Are you or your spouse working/planning to work past 65?
YES

You might be able to delay Medicare enrollment. It generally depends on whether you are covered by a workplace health insurance plan and if so, the type and size of the employer.

GO TO QUESTION 3
NO
STOP HERE

Generally speaking, if you are not going to work past 65 you will need to get on Medicare right at 65. This is the case even if you have COBRA or retiree insurance from a former employer. Since you have not started Social Security, you will not be automatically enrolled in Parts A or B. You are subject to the “Initial Enrollment Period”, which means you must proactively apply for all parts of Medicare within the following time frame:

  • Parts A, B, D and/or Medicare Advantage you must apply between 3 months before or 3 months after the month you turn 65. Ideally you should register before your birth month so Medicare coverage starts right away (if you wait until your birth month or three months after, coverage will be delayed).
  • Medigap you must apply within 6 months of being both 65 and enrolled in Part B if you want Medigap instead of Medicare Advantage (remember, you cannot have both – it is one or the other!). 
QUESTION 3
Do you have health insurance from your (or your spouse’s) employer?
YES

You might be able to delay Medicare enrollment. However, it’s not enough to just be covered by an employer health plan. It depends on the type and size of the employer.

Note – as mentioned in #2 above, COBRA and retiree health insurance from a former employer do not count. If you have this type of insurance, continue as if you answered “no”. 

GO TO QUESTION 4
NO
STOP HERE

It doesn’t matter that you’re going to work past 65 – not having employer health insurance means you will need Medicare. You must apply during your Initial Enrollment Period, which is:

  • Parts A, B, D and/or Medicare Advantage you must apply between 3 months before or 3 months after the month you turn 65. Ideally you should register before your birth month so Medicare coverage starts ASAP (if you wait until your birth month or three month afters, coverage will be delayed).
  • Medigap you must apply within 6 months of being both 65 and enrolled in Part B if you want Medigap instead of Medicare Advantage (remember, you cannot have both – it is one or the other!). 
QUESTION 4
Is the health insurance from your (or your spouse’s) self-employment?
YES

Health insurance from self-employment unfortunately does not count. You must register for Medicare during your Initial Enrollment Period as follows:

  • Parts A, B, D and/or Medicare Advantage you must apply between 3 months before or 3 months after the month you turn 65. Ideally you should register before the month of your birthday so Medicare coverage starts ASAP (if you wait until your birth month or three months after, coverage will be delayed).
  • Medigap you must apply within 6 months of being both 65 and enrolled in Part B if you want Medigap instead of Medicare Advantage (remember, you cannot have both – it is one or the other!). 
NO

You might be able to delay Medicare enrollment. The last factor is the size of the employer.

GO TO QUESTION 5
QUESTION 5
Does the employer from whom you receive health insurance have more than 20 employees?
YES

You qualify for delayed Medicare enrollment, called the “Special Enrollment Period”.

  • Parts A & B – you can apply for Parts A and B anytime before your employer insurance ends, and up to 8 months after.

Keep in mind Part A is free for most people. For that reason it usually makes sense to enroll in Part A (only) when you turn 65 but delay Part B (not free) until you retire. Part A would be secondary to your employer insurance, meaning Medicare may pick up the tab for expenses not covered by the employer plan.

On the other hand, if you are contributing to a Health Savings Account (and want to keep doing so) you should delay both A & B until you retire. Being on any part of Medicare disqualifies you from making HSA contributions. 

  • Part D/Medicare Advantage  your employer health plan must have had creditable drug coverage to qualify for Part D’s delayed enrollment. Check with your benefits department on whether your prescription coverage qualifies:
    • If “yes” – you qualify for delayed enrollment and can sign up for Part D anytime before your current plan ends, and up to 63 days after.
    • If “no – you do not qualify for delayed enrollment. You must register for Part D as per the Initial Enrollment Period, which is the 3 months before and 3 months after the month you turn 65
  • Medigap you must apply within 6 months of being both 65 and enrolled in Part B if you want Medigap instead of Medicare Advantage (remember, you cannot have both – it is one or the other!). 
NO

It does not matter that you have employer-provided health insurance if the employer is smaller than 20 people. You are subject to the Initial Enrollment Period, i.e. the same window as if you were retired or didn’t have health insurance at all:

  • Parts A, B, D and/or Medicare Advantageyou must apply between 3 months before or 3 months after the month you turn 65. Ideally you should register before the month of your birthday so Medicare coverage starts ASAP (if you wait until your birth month or three months after, coverage will be delayed).
  • Medigap you must apply within 6 months of being both 65 and enrolled in Part B if you want Medigap instead of Medicare Advantage (remember, you cannot have both – it is one or the other!). 
Can I Postpone Medicare even if I'm already on Social Security?

Remember, you are automatically enrolled in Medicare Parts A and B if you started Social Security more than four months before turning 65. It does not matter whether you intend to keep working and will have employer health insurance.

So is there anything you can do about this? In other words, if you don’t want or need Medicare, can you stop it from automatically starting?

The answer is yes, with shades of gray.

You can postpone Medicare penalty-free only if you otherwise qualify for delayed enrollment after taking Social Security out of the equation. Note, however, there are different rules for Parts A and B.

The only way to postpone Part A is to withdraw your original Social Security application. This means you must pay back every penny Social Security has given you to-date. In other words, you are reversing your decision to start Social Security.

For Part B, you have up until the month you turn 65 to notify Medicare of your intention to postpone enrollment. In other words you have to stop it before it starts. You can postpone Part B by either following the instructions on the back of your Medicare ID card or by calling Social Security (1-800-772-1213).

Going forward you can re-apply for Parts A and B according to the Special Enrollment Period deadlines.

Note, you should consult a qualified professional beforehand to discuss how withdrawing your Social Security application and/or postponing Medicare affects your specific situation. 

What happens if I miss my Medicare enrollment period?

We touched on this in Part I, “What Does Medicare Cover and How Much Does it Cost?”.

If you miss either the Initial Enrollment Period or Special Enrollment Period the only other time you can apply is between January 1 – March 31 each year (called the General Enrollment Period). Your benefits won’t start until July 1, meaning you may have to go months without any kind of health insurance. Not good!

You will also pay lifetime penalties for missing your enrollment window. Also not good!

The penalty for Part B is an extra 10% premium for every 12-month period you missed (in 2020 the base premium is $144.60/month). There is no cap – the more time you miss, the higher your penalty will be!

The penalty for enrolling late in Part D is an extra 1% for each month missed (the average premium is about $33/month). Like Part B it is uncapped.

As for Medigap, the stakes are even higher. If you miss your enrollment window, you don’t just risk paying more: insurance companies can flat out deny your application.

Bottom line – do not miss your enrollment window!

How Do I Apply for Medicare?

If you won’t be automatically enrolled in Medicare then the last step is to know how to apply. Easy! There are three ways:

1) online, though the Social Security website;

2) over the phone at 1-800-772-1213

3) in-person appointment at your local Social Security branch.

One Last Thing!

For all you visual learners out there, be sure to check out these handy flowcharts as added resources to guide you through the Medicare process (click the image to download):

are you automatically enrolled in medicare
Will I Be Automatically Enrolled in Medicare?
will i pay medicare penalties
Will I Pay Late Enrollment Penalties?

Healthcare is clearly an important topic for today’s retirees, especially as longer lifespans create the very real possibility of a decades-long retirement. Medicare is an integral part of the vast majority of Americans’ retirement health care plans. It’s incredibly important for retirees to know the system and when to sign up! Even one small misstep can have dire, life-long consequences.

Please call or email if you have questions or want to discuss how healthcare expenses may impact your retirement plan. Our financial advisors are happy to help!

Disclosures1:

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