People can defer enrolling in original Medicare, although they may incur penalties and additional costs.
Medicare is a federal health insurance program for people aged 65 and older, and may also provide benefits for people with disabilities.
This article discusses reasons for deferring enrollment in original Medicare, when it can be done, and the possible penalties. It also looks at Medicare coverage and costs.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person 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 is working and their employer has 20 or more employees and offers a group health plan as defined by the IRS. Or, if a person’s spouse is working and they are covered by a similar group health plan.
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, although 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.
A person with a Health Savings Account (HSA) may want to defer enrolling in Medicare, as contributions to the HSA stops after they enroll.
A person is first eligible for original Medicare in their initial enrollment period (IEP), which begins 3 months before the month they turn 65, includes their birthday month and ends 3 months after the month they turn 65.
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–March 31. Coverage starts on July 1. 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 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.
The 8-month SEP starts either in the month a person is not employed, or the month after the group health plan ends, whichever event happens first.
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 10% late penalty 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.
Medicare has four different parts, which provide different services coverage:
- Part A provides hospital insurance, including care in a hospital, hospice, non-custodial nursing home care, home health, and skilled nursing facility care.
- Part B provides medical insurance, which includes medically necessary services for diagnosis and treatment, as well as preventive services.
- Part C, also known as Medicare Advantage, provides alternative coverage to original Medicare (Part A and Part B).
- Part D provides prescription drug coverage.
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 2021 is $471. However, if a person paid the taxes for 30-39 quarters, the standard Part A premium is $259.
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 2021 is $148.50. 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 $1,484 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 $371 per day for days 60–90.
- Part B deductible is $203 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. The policies help cover additional costs such as copays, deductibles, and coinsurance and are offered by private companies.
Under some conditions, a person can defer enrolling in original Medicare without a late penalty enrollment charge, including if they are covered by an IRS-approved group health plan.
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.