October 6, 2021
If you’re in your early 60s, you’re probably starting to hear a lot about signing up for Medicare. You might be wondering if Medicare is required, and you might have questions about your options. This guide will help you understand if Medicare is required for you.
We’ll cover situations where it is strictly required and situations where you could choose to delay coverage. We’ll also introduce you to optional Medicare parts and Medicare parts that are mandatory. We’ll help you learn about late penalties for Medicare and whether these might apply to you.
When is Medicare mandatory?
Medicare has been mandatory for state and local government employees since April 1986. It is optional for all other individuals unless you receive Social Security benefits.
Which Medicare Parts are mandatory?
If you receive Social Security benefits, you’re required to enroll in Part A. If you don’t enroll, you’ll no longer receive Social Security payments. Part A covers inpatient hospital care, and it’s free to individuals who have paid Medicare taxes for at least 10 years (or 40 quarters).
If you’re not getting Social Security benefits yet, Part A is not yet mandatory for you. You might choose to delay signing up for Part A in certain situations.
Medicare Part B is medical insurance that covers primary care, laboratory tests, and any care that you receive as an outpatient. It also pays for certain medical devices, including mobility aids. Part B is technically optional, but if you do not have creditable coverage in its place, you may end up paying penalties later on.
What Parts of Medicare are optional?
Medicare Part C (Medicare Advantage) is an optional replacement for Parts A and B. This Part is administered by private insurance companies and often provides extra coverage alongside the basic Medicare coverage. For instance, many Part C plans offer dental and vision coverage while some provide coverage for prescriptions and hearing aids. You may even find Part C plans that cover fitness benefits, transportation to doctor’s appointments, and home meal delivery after being discharged from the hospital.
Part D is another Part of Medicare that is not mandatory, but it may result in late enrollment penalties. This Part provides coverage for prescription drug costs and can provide important savings and capabilities. For instance, you can choose to have your prescriptions delivered through the mail-order pharmacy option, and you might be able to get a three-month supply of your medicine.
Why would I delay Medicare?
If you’re working at age 65 or above, you may be able to get health insurance through your employer. While you may be happy with this coverage, we recommend you still explore your Medicare options. Medicare can work with your existing health insurance to save you even more money. However, discuss this with your current carrier to be sure.
Likewise, you may be interested in delaying Medicare because you are contributing to a Health Savings Account (HSA). Once you enroll in Part A, you can’t contribute to a Health Savings Account anymore, but you can continue to use those for funds for any qualifying health costs. It may be well worth it to switch to Medicare as soon as you’re eligible and use your HSA funds for copays, coinsurance, and deductibles.
Lastly, you might be tempted to delay Medicare enrollment because you don’t want to pay the premiums. However, be aware that if you delay your enrollment, you might be penalized with late fees that could increase your premiums when you do eventually sign up.
What are the penalties for late Medicare enrollment?
If you decline or delay Medicare, you could face late fees and other penalties. In order to avoid these penalties, you’ll need to be able to prove you had creditable coverage during the time you delayed. People who delay Medicare because of existing coverage through an employer won’t normally face any penalties or late fees when they sign up.
Otherwise, the exact penalties that you’ll face depend on your situation:
If you haven’t worked long enough to qualify for free Medicare Part A, you’ll need to pay a penalty of up to 10% on the standard monthly premium after you sign up. You’ll have to pay the penalty for twice the length of time that you declined Part A. For example, if you declined Part A for two years, you’ll pay the penalty for four years.
If you get Medicare Part A for free, you won’t pay a penalty for late enrollment.
Part B penalties for late enrollment are up to 10% of the standard monthly premium for each 12-month period that you declined or delayed enrollment. You’ll have to pay Part B penalties for as long as you’re enrolled in Part B. If you delayed enrollment in Part B by one year, your penalty will be 10%. If you delayed by two years, a penalty of up to 20% could be added to your Part B premium for the rest of your enrollment in Part B.
If you can prove that you had creditable coverage while you delayed enrollment, you can typically avoid this penalty.
Part C doesn’t have its own specific penalties. However, since Part C plans include coverage for Parts A and B, you’ll still be charged penalties for late enrollment in Part A and Part B.
If you sign up for Part D after your Initial Enrollment Period (IEP), you’ll be required to pay a penalty for the entire time that you’re enrolled in Part D.
To calculate the penalty, you’ll need to know the national base beneficiary premium for the year in which you’re signing up. In 2022, the premium is $33.371. Round the premium up to the nearest $0.10, and then calculate 1% of that figure. Then, multiply that result by the number of months you were without Part D coverage. The resulting amount is the amount that will be added to your Part D monthly premiums. If you do not pay the premium or the penalty, your prescription coverage could be dropped.
What are the advantages to signing up for Medicare during the Initial Enrollment Period?
By signing up for Medicare during your Initial Enrollment Period (IEP), you’ll get a variety of benefits. You’ll be able to transition smoothly to Medicare from your previous health insurance, and you won’t have to worry about any lapse in your routine health care appointments or daily prescriptions. Plus, you’ll never have to worry about late enrollment penalties or proving your creditable coverage.
You also open up your coverage options beyond your basic health care plan. You can purchase auxiliary coverage that is specifically designed to work with Medicare, like Medicare Supplement Insurance. Joining a Medigap plan during your initial enrollment window guarantees coverage without any health checks and gets you the lowest possible rate for that plan.
Where can I get help with understanding my Medicare options?
At SmartMatch, we specialize in helping you with Medicare comparison shopping. We are happy to help you with finding the most appropriate Medicare plan for your needs. Call us today or visit our Plan Comparison Tool to get started.
Source: Part D late enrollment penalty. Centers for Medicare & Medicaid Services. Retrieved from https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty