If you or your spouse have health insurance coverage through a large group employer or union, or you want to keep your health savings account (HSA), you may defer Medicare coverage.

Sometimes, it might make sense to defer Medicare coverage if you have other coverage. But if you lose your coverage, failure to sign up within a specific time frame may result in long lasting or even permanent penalties.

To defer Medicare, you must have qualifying health insurance, such as a large group plan covering 20 or more employees.

This article will provide more information before deciding 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.

Remember, though, that most people eligible for Medicare 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.

You can defer Medicare Part A. Since there’s typically no cost associated with signing up, you might find that it’s in your best interest to sign up when first eligible.

Medicare Part B

Medicare Part B covers outpatient medical costs and comes with a monthly premium for all Medicare beneficiaries. The standard premium is $174.70 per month in 2024, but this rate could be higher based on your income.

You can also defer Part B coverage. However, if you defer Medicare Part B coverage, you may receive significant financial penalties that will last throughout your Medicare coverage when you do sign up. In some situations, you may be able to defer without penalties. We’ll review those situations below.

If you’re considering 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 your Medicare coverage.

Next, we’ll discuss some common reasons you may be considering deferring Medicare.

You have health insurance you want to keep

If you currently have a health insurance plan you love through a job, your spouse, a union, or another 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 Part B and D cover, you won’t have 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 enrolled in original Medicare, you can no longer 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 have 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, enrolling in Medicare Part A makes sense, so you can access services you may need at non-VA hospitals.

You might also be better off getting Part B during initial enrollment, even though you have to pay a monthly premium. If you defer enrollment in Part B, 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.

For flexibility, you might also want to enroll in a Medicare Part D (prescription drug) plan or a Medicare Advantage (Part C) plan that covers medications.

VA benefits include prescription drug coverage that’s considered to be at least as good as Medicare coverage. However, it requires you to use a VA medical facility 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% for double the 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% 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% as long as you have a Part B plan.

Declining all Medicare coverage

In some cases, you may wish to decline Medicare completely. 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 or Railroad Retirement Board benefits. You must also return any payments you’ve already received through these programs.

How to delay Medicare without penalty?

You can defer Medicare without penalty in some situations, such as if you have other insurance that covers everything Medicare covers. But you must sign up within 8 months of your current coverage ending.

Can you defer Medicare if you are still working?

You can defer Medicare if you are still working and your current healthcare insurance covers everything Medicare covers. But if you lose that coverage, you must sign up for Medicare within 8 months to avoid penalties.

What is the penalty for deferring Medicare?

The penalty for deferring Medicare depends on how long you did not sign up for. If you’re not eligible for premium-free Part A and buy it late, your monthly premium will rise by 10% for double the number of years you didn’t sign up. 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.

How do I defer Medicare Part B enrollment?

You can defer Medicare Part B coverage by not signing up during your initial enrollment period. However, unless you have a Medicare-approved reason for deferring, you may have to pay long lasting penalties for not enrolling.

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 with your current employer or plan administrator to determine how you can best coordinate your current plan with Medicare.

Avoid letting 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.