Ask the Medicare Specialist

QUESTION:

Are you required by law to sign up for Medicare and if you don’t is there any type of penalty? Also, can you sign up for Medicare when you take social security?

ANSWER:

This is a great question. Far too often people don’t get the correct advice or information regarding opting out of Medicare Part B. Let me answer these questions and give some examples of who should and shouldn’t opt out of Medicare. First, you’re only eligible for Medicare at age 65 or 24 months after being awarded Social Security/Disability. Those who elect to collect Social Security prior to age 65 are not eligible. Secondly, you are not required by law to sign up for Medicare and there are many people who are wise to forgo Part B while they’re still working. That being said, Part A is no cost and I recommend signing up for that when first eligible. It could come in handy if you’re ever hospitalized and have a sizeable deductible on your employer sponsored health plan. And lastly, there can be penalties for those who opt out of Part B and don’t have other insurance provided by an employer, be that your own or your spouse’s. The penalty can be quite significant, 10% per year for every year you go without. Part B now costs $135.50/month. If someone went 10 years without Part B and didn’t have employer sponsored health insurance during that time and then decided they needed or wanted it, the penalty would be 100%, bringing the total Part B premium to $271/month. And that penalty is assessed as long as you have Part B! Two groups of people who are more likely to make the mistake of not taking Part B when they should have are: Those who have VA benefits. Most veterans have no coverage outside of VA facilities. So, a vet who didn’t have Part B and was ambulanced to a non-VA hospital would be responsible for the full cost of that ride and the Emergency Room bill, if applicable. If a hospitalization were necessary, the cost would be $1,364, even if the admission was only for a single day. Then there’s the possibility that the VA may not be able to treat certain conditions, rare diseases, or Cancer. Without Part B, going to a non-VA hospital to get treatment or surgery could very well be unaffordable. I would never recommend a veteran opt out. Teachers or others who were awarded health insurance as part of an early retirement incentive package. We have met many teachers in this situation who received seven years of excellent health benefits for themselves and their spouses at no cost. Often, they either were given the wrong information regarding opting out of Part B or thought why pay for it when I have such good insurance for free? That line of thinking makes a ton of sense, but unfortunately, Medicare doesn’t see it that way. Only those who are “working” or have a spouse who is “working” and getting health insurance from an employer can opt out of Part B without penalty. What these folks find out as they go to enroll in Medicare when their insurance ends, is in addition to the penalty, those who didn’t enroll at age 65 can only do so afterwards from January through March. And Part B doesn’t go into effect until July of that year. If someone in this situation ran out of their health insurance in May, they wouldn’t even be able to get Part B until July of the following year! That’s 13 months. Often, taking COBRA that may cost over $1,000/month would be their only option in the interim. Now let’s discuss who should opt out of Part B. I almost always advise people to do so if they get their health insurance at work for under $100/month. Since Medicare is $135 and a Supplement, which most of our clients choose when they go on Part B for the first time, costs around $100 additionally, the choice is pretty obvious. There are other factors that need to be considered however, such as the size of your deductible and total exposure to out of pocket costs. For many that could be as much as $7,000! In that case, paying $100-$200 per month to eliminate the possibility of thousands of dollars in medical bills may make sense. If you are over 65, working, and getting health benefits from an employer, pay attention to what is being taken out of your check for insurance. Many people don’t know what they’re contributing towards the cost. It may make more financial sense to go on Medicare instead of staying on your plan. This is especially true if you are carrying a spouse. Many employers pay most or all the premium for the employee but force you to pay a lot more for a second person. You need to get that broken down. On plenty of occasions, we have found that the working half of the family is best to stay on the plan, but the spouse who isn’t is better off on Medicare. The bottom line is there’s no one size fits all approach. I advise everyone to call our office or email me before opting out of Part B to make sure you are making the right decision and avoiding a future penalty.