- Medicare isn’t mandatory. You may defer Medicare coverage if you feel it’s in your best interest to do so.
- If you or your spouse have health insurance coverage through a large group employer or union, you may defer Medicare coverage.
- Another reason for deferring Medicare is if you want to keep your health savings account (HSA).
- If you lose your current coverage, you must sign up for Medicare within a certain time frame. If you don’t, you’ll incur penalties that may last your whole life.
Like many people, you or a loved one might not be ready to take the plunge into Medicare coverage, despite being eligible. In some instances, it might make sense to defer coverage. In others, it may wind up costing you long-lasting or even permanent penalties.
It’s also important to know that you can’t receive Social Security benefits while deferring Medicare.
To defer Medicare, you must have qualifying health insurance, such as through a large group plan that covers 20 or more employees.
This insurance can be through your workplace or your spouse’s workplace. It can also be through a union or other source, such as Veterans Affairs (VA). Plus, it will need to provide the equivalent of Medicare Part B coverage and Medicare Part D (prescription drug) coverage.
Even if you defer Medicare Part B, you may still wish to sign up for Part A, which is premium-free for most people.
This article will provide more information to consider before you decide whether to defer Medicare. It’ll also cover how to enroll in Medicare when you’re ready.
Medicare isn’t mandatory. You can defer Medicare coverage if you feel it’s in your best interest to do so.
Keep in mind, though, that most people who are eligible for Medicare do benefit from enrolling in both Part A and Part B (original Medicare) during their initial enrollment period.
Medicare Part A
Medicare Part A covers hospital expenses. If you or your spouse worked for at least 10 years (40 quarters), you will most likely be eligible for premium-free Part A when you turn 65 years old.
Since there’s typically no cost associated with signing up for Part A, you mind find that it’s in your best interest to sign up when first eligible. If you’re not eligible for premium-free Part A, your monthly cost could be as high as $471 per month in 2021.
Medicare Part B
Medicare Part B covers outpatient medical costs and comes with a monthly premium for all Medicare beneficiaries. The standard premium is $148.50 per month in 2021, but this rate could be higher based on your income.
In 2021, if you earn more than $88,000 or you and your spouse collectively earn more than $176,000, your monthly premium will be higher. Monthly premiums for Medicare Part B range from $148.50 to $504.90.
Initial enrollment begins 3 months before you turn age 65, includes your entire birthday month, and continues for more 3 months after that. This gives you a total of 7 months to review your options and enroll, if desired.
If you don’t enroll in Medicare during initial enrollment, you may receive major financial penalties that will last throughout your Medicare coverage. In some situations, you may be able to defer without penalties; we’ll review those situations later.
If you’re thinking about deferring Medicare, discuss the pros and cons with your current insurer, union representative, or employer. It’s important to know how or if your current plan will work with Medicare, so you can choose the most comprehensive overage possible.
No matter your reasons for deferring, you must enroll in Medicare within 8 months of losing your current coverage. If you delay, you will incur penalties that may last for the entire duration of your Medicare coverage.
Next, we’ll discuss some of the common reasons you may be thinking about deferring Medicare.
You have health insurance you want to keep
If you currently have a health insurance plan that you love – either through a job, your spouse, a union, or other source – you may wish to continue your current coverage.
Deferring Medicare may save you money on monthly premiums, especially if you’re a high-wage earner. If your current insurance is provided through a large group insurer and covers everything that Medicare parts B and D cover, you won’t be hit with a penalty if you defer for this reason.
You want to keep contributing to an HSA
You may also want to defer signing up for original Medicare if you currently have a health savings account (HSA). Once you’re enrolled in original Medicare, you’re no longer able to contribute funds to an HSA.
The money you put in an HSA increases on a tax-free basis and can be used to pay for many healthcare expenses.
HSAs are available to people with high-deductible health insurance plans. If your current health insurance meets Medicare’s requirements for creditable coverage, you won’t incur a penalty if you defer for this reason.
You want to use your current Veterans Affairs benefits
If you’re a military veteran and have benefits through the Department of Veterans Affairs, you’re covered only for services provided at VA facilities. VA benefits typically won’t cover services you get at outside facilities, unless specifically authorized by the VA.
In this instance, it makes sense to enroll in Medicare Part A, so you can access services you may need at non-VA hospitals.
You might be better off getting Part B during initial enrollment as well, even though you have to pay a monthly Part B premium. If you defer enrollment, long-term penalties will raise your rates.
If you do enroll in Part B, your VA benefits will continue to pay for things that Medicare doesn’t cover, such as hearing aids and over-the-counter medications. You may also qualify for help paying your premiums through a Medicare savings program.
VA benefits include prescription drug coverage that’s considered to be at least as good as Medicare coverage. But it requires you to use a VA medical provider and pharmacy.
If you lose your VA benefits or decide you want a Part D plan, you may enroll without penalty, even after your initial enrollment period expires.
You currently have TRICARE or CHAMPVA coverage
Active duty and retired military members and their families are typically eligible for TRICARE health insurance through the Department of Defense. Those who aren’t eligible, such as surviving spouses and children, may be eligible for CHAMPVA (Civilian Health and Medical Program of the Department of Veterans Affairs) coverage.
If you have TRICARE or CHAMPVA coverage and are eligible for premium-free Part A, you must also enroll in Part B to keep your current coverage.
If you aren’t eligible for premium-free Part A, you’re not required to sign up for Part A or Part B. If you don’t sign up during initial enrollment, though, you will incur a lifetime late enrollment penalty whenever you do sign up.
If you want to defer Medicare coverage, you don’t need to inform Medicare. It’s simple: Just don’t sign up when you become eligible.
You can also sign up for Part A but not Part B during initial enrollment.
Special enrollment periods
To avoid penalties, you must enroll within 8 months of when your current coverage ends. This is known as a special enrollment period.
Certain events can trigger special enrollment periods, such as losing your current health insurance. If this happens, don’t wait for the next Medicare open enrollment period, otherwise you may have a lapse in coverage and owe penalty fees.
The 8-month special enrollment period does not include any months that you’re covered by COBRA. For example, if your employment is terminated in March but you continue to pay for your own coverage through COBRA for April and May, your 8-month special enrollment period begins in March and ends in October.
Late enrollment penalties
If you miss both initial enrollment and special enrollment, your late enrollment penalties may be steep and may last a long time.
If you’re not eligible for premium-free Part A and buy it late, your monthly premium will rise by 10 percent for double the number of years you didn’t sign up. For example, if you deferred coverage for 5 years, you’ll pay the higher premium amount for 10 years.
If you sign up late for Part B, you’ll pay a lifelong late penalty fee every month on top of your regular Part B premium. The added fee is 10 percent of the Part B premium for each 12-month period you were eligible but didn’t sign up.
For example, if you were eligible for Part B but didn’t enroll until 2 years later, your premium will be increased by an extra 20 percent for as long as you have a Part B plan.
Declining all Medicare coverage
In some cases, you may wish to completely decline Medicare. This could either be because you have other health insurance or for religious or philosophical reasons.
If you do this, you will forfeit all Social Security benefits or Railroad Retirement Board benefits. You will also be required to return any payments you’ve already received through these programs.
Enrolling in original Medicare
If you have certain disabilities or health conditions, you can enroll in Medicare at any age.
For more people, enrollment is triggered by their 65th birthday. This is known as the initial enrollment period. It starts 3 months before the month you turn 65, lasts through your birth month, and ends 3 months after that.
During an annual general enrollment period, you can sign up for original Medicare or a Medicare Part C plan. General enrollment runs each year from January 1 through March 31.
You can sign up for original Medicare in several ways:
- through the Social Security Administration website
- through your local State Health Insurance Assistance Program (SHIP) office
- by calling Social Security at 800-772-1213 (TTY: 800-325-0778)
- in person at your local Social Security office
Enrolling in Medicare Part D
You can sign up for a Part D plan during this time or during the 2-month period after you sign up for original Medicare.
Part D plans can be added to your coverage during the open enrollment period, which takes place each year from October 15 through December 7.
Although Part D is an optional part of Medicare, you may pay a late enrollment fee if you sign up after these time periods.
- Most people benefit by signing up for original Medicare when they first become eligible.
- In some situations, though, it may make sense for you to wait.
- Talk to your current employer or plan administrator to determine how you can best coordinate your current plan with Medicare.
- Don’t let your healthcare coverage lapse. This not only puts you in a tight position if you suddenly fall ill, but it also may cost you more money in penalties and late fees once you do sign up for Medicare.
This article was updated on November 20, 2020, to reflect 2021 Medicare information.
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