You can opt out of Medicare, but you may lose your Social Security or Railroad Retirement Board benefits. Also, if you decline Medicare coverage initially, you may have to pay a penalty if you decide to enroll later.

Medicare is a public health insurance program designed for individuals age 65 and over and people with disabilities. The program covers hospitalization and other medical costs at free or reduced rates.

The hospitalization portion, Medicare Part A, usually begins automatically at age 65. Other Medicare benefits require you to enroll.

If you keep working beyond age 65, you may have health insurance through your employer or have purchased a plan outside of Medicare. In this case, you may choose to refuse Medicare coverage. However, delaying enrollment can add extra costs or penalties down the road.

Medicare is a federal benefit that you pay for through taxes during your working years. At age 65, or if you have certain disabilities, you become eligible for health coverage through various parts of the Medicare program.

While Medicare isn’t necessarily mandatory, it is automatically offered in some situations and may take some effort to opt out of.

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.

Some of the common reasons you may want to consider deferring Medicare include:

Medicare isn’t exactly mandatory, but it can be complicated to decline. Late enrollment comes with penalties, and some parts of the program are optional to add, like Medicare parts C and D. Medicare parts A and B are the foundation of Medicare, though, and to decline these comes with consequences.

The Social Security Administration oversees the Medicare program and recommends signing up for Medicare when you are initially eligible, even if you don’t plan to retire or use your benefits right away. The exception is when you are still participating in an employer-based health plan, in which case you can sign up for Medicare late, usually without penalty.

While you can decline Medicare altogether, Part A at the very least is premium-free for most people, and won’t cost you anything if you elect not to use it. Declining your Medicare Part A and Part B benefits completely is possible, but you are required to withdraw from all of your monthly benefits to do so. This means you can no longer receive Social Security or RRB benefits and must repay anything you have already received when you withdraw from the program.

The penalties for choosing not to enroll in Medicare, or enrolling late, can be just as confusing as figuring out which parts of the program are mandatory. The penalties for not enrolling when you are first eligible for Medicare, again, depending on the program.

Part A

If you choose not to sign up for Medicare Part A when you become eligible, a penalty may be assessed. This penalty depends on why you chose not to sign up.

If you simply chose not to sign up when you were first eligible, your monthly premium — if you have to pay one — will increase by 10% for twice the number of years that you went without signing up. For example, if you waited two years to sign up, you will pay the late enrollment penalty for 4 years after signing up.

Part B

The penalty for Medicare Part B is a little different than Part A. If you choose not to sign up for Medicare Part B when you first become eligible, you could face a penalty that will last much longer than the penalty for Part A.

The Part B penalty is 10% of the standard premium for each 12-month period you were not signed up, and you will have to pay this penalty for as long as you are enrolled in Medicare.

For example, if you waited 1 year past your initial enrollment period to sign up for Part B, your premium price will increase by 10% for the rest of the time you are enrolled. If you waited 2 years to sign up past your initial enrollment period, your premium will increase by 20% for the rest of the time you are enrolled.

Part C

Medicare Part C (Medicare Advantage) is optional and does not have penalties on its own, but penalties may be included for late enrollment in the parts of Medicare included within your Medicare Advantage plan.

Part D

Medicare Part D is not a mandatory program, but there are still penalties for signing up late. If you don’t sign up for Medicare Part D during your initial enrollment period, you will pay a penalty amount of 1 percent of the national base beneficiary premium multiplied by the number of months that you went without Part D coverage.

In 2024, the national base beneficiary premium is $34.70 and changes every year. If you have to pay the penalty, the penalty amount will be rounded to the nearest $.10, and this amount will be added to your monthly Part D premium for the rest of the time you are enrolled.

If you disagree with the penalty you are assessed, you can appeal the decision but must continue to pay the penalty along with your premium. Your prescription drug plan can drop your coverage if you fail to pay the premium or penalty.

Can I avoid penalties?

There are some special circumstances in which you can sign up late for Medicare without paying penalties. After the initial enrollment period, you can sign up for optional programs during special enrollment periods.

If you or your spouse continued working past your 65th birthday and had health insurance through your employer, you won’t have to pay a penalty for late enrollment in any of the Medicare programs.

Beginning the month after you end your employment, or when your group health plan insurance from that employment ends, you have an 8-month window to sign up for Medicare parts A and B without penalty.

COBRA and retiree health plans are not considered as coverage under current employment and do not qualify you for a special enrollment period or save you from late enrollment penalties.

You can also qualify for a special enrollment period for Medicare parts A and B and avoid late enrollment penalties if you were volunteering in a foreign country during your initial enrollment period.

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  • Medicare is made up of several different programs, each with different rules for signing up, costs, and penalties for late enrollment.
  • If you continue to work after age 65 and have health insurance from you employer, you can usually sign up for Medicare after your employer coverage ends without paying a penalty.
  • If you choose to buy your own health insurance plan outside of an employer plan when you are eligible for Medicare, it may be in your best interest to enroll anyway. Declining Medicare completely is possible, but you will have to withdraw from your Social Security benefits and pay back any Social Security payments you have already received.