A person may wish to defer or delay enrolling in Original Medicare in certain circumstances. However, this may incur penalties and additional costs.
Medicare is a federal health insurance program for people ages 65 and older. It may also provide benefits for people with disabilities.
This article discusses reasons for deferring enrollment in Original Medicare, when a person can defer, and the possible penalties. It also looks at Medicare coverage and costs.
Glossary of Medicare terms
We may use a few terms in this article that can be helpful to understand when selecting the best insurance plan:
- Out-of-pocket costs: An out-of-pocket cost is the amount a person must pay for medical care when Medicare does not pay the total cost or offer coverage. These costs can include deductibles, coinsurance, copayments, and premiums.
- Deductible: This is an annual amount a person must spend out of pocket within a certain period before an insurer starts to fund their treatments.
- Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, this is 20%.
- Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
A person may want to defer enrolling in Original Medicare Part A and Part B if they feel it is in their best interest. For example, if a person has a medical insurance policy, they may feel it is not necessary to have two policies.
However, in some situations, people who defer enrolling in Original Medicare may pay a penalty on the premium.
Since many people do not pay a premium for Medicare Part A, a person may decide to enroll in Part A, even if they want to defer Medicare Part B.
In some situations, Medicare allows people to defer enrolling in Original Medicare without paying a penalty, such as if a person or their spouse is working and their employer has 20 or more employees and offers a group health plan as defined by the IRS.
There are two other times when a person can defer enrollment.
If a person chooses COBRA health coverage after their employment ends, they keep their employer group health plan for 18 months, though at a higher cost. A person then has 8 months to sign up for Medicare, with or without COBRA. People who wait longer pay a penalty related to the time they have Part B.
Learn more about COBRA and Medicare.
A person with a Health Savings Account (HSA) may want to defer enrolling in Medicare, as contributions to the HSA stop after they enroll. A person should stop contributing to their HSA at least 6 months before they enroll in Medicare.
Learn more about HSAs and Medicare.
A person is first eligible for Original Medicare in their initial enrollment period (IEP), which starts 3 months before the month they turn 65, continues during their birthday month, and ends 3 months after the month they turn 65, lasting 7 months in total.
People who wait to enroll in Medicare after the IEP and do not qualify to defer may pay a lifetime late enrollment penalty. The penalty increases the longer a person waits to enroll.
The general enrollment period happens every year from January 1 to March 31. People can sign up during this time if they did not enroll during their IEP or if they are not eligible for a special enrollment period (SEP).
After a person’s IEP ends, they may qualify for a SEP. Generally, people do not pay a late enrollment penalty when they qualify for and enroll with a SEP.
People covered by a group health plan through their employer will have a SEP if the person or their spouse is working or if the person is covered by a group health plan through the employer or union.
A person who qualifies for premium-free Medicare Part A can enroll during their IEP, and they will not pay a premium.
Part A
If a person has to buy Part A, they may have to pay a late penalty of a 10% increase on their monthly premium if they do not enroll during their IEP.
The penalty is calculated as a percentage of the premium and is generally twice the number of years a person delayed enrolling.
Part B
A person who delays enrolling in Medicare Part B may also pay a 10% penalty if they do not qualify for a SEP.
The late enrollment premium lasts for as long as a person has Medicare Part B. The penalty increases 10% for every full 12-month period a person delays enrolling.
Learn more about Medicare late enrollment penalties.
A person may qualify for premium-free Medicare Part A if they or their spouse has paid Medicare taxes for a certain amount of time.
In addition, a person may qualify for premium-free Part A if:
- they already get retirement benefits from Social Security or the Railroad Retirement Board (RRB)
- they are eligible for benefits from Social Security or the RRB but have not filed
- they or their spouse were government employees
If a person does not qualify for the premium-free Part A, the monthly premium depends on how much Medicare taxes they paid. If a person paid the taxes for less than 30 quarters, the standard Part A premium in 2024 is $505. However, if a person paid the taxes for 30-39 quarters, the standard Part A premium is $278.
If a person chooses to buy Part A, they must also have Part B and pay premiums for both parts A and B.
The standard Medicare Part B monthly premium in 2024 is $174.70. The premium is paid to Medicare unless a person gets certain benefits, in which case the premiums may be automatically deducted. The benefits include:
- Social Security
- RRB
- Office of Personnel Management
There are other costs to Original Medicare, including deductibles, coinsurance, and copays.
- Part A deductible is $1,632 per benefit period. This begins the day of admission and ends when a person has not received any inpatient care for 60 days.
- Part A coinsurance is $0 for the first 60 days and $408 per day for days 61 to 90.
- Part B deductible is $240 per year.
- Part B coinsurance is 20% of the medically approved charges, and Medicare pays the remaining 80%.
A person can also get a Medicare supplement insurance policy called Medigap. Private companies offer these policies, and they help cover additional costs such as copays, deductibles, and coinsurance.
Under some conditions, a person can defer or delay enrolling in Original Medicare without a late penalty enrollment charge, including if an IRS-approved group health plan covers them.
A person may enroll during their IEP in the 7 months around their birthday. If they qualify for a SEP, they may not be charged a penalty for late enrollment.