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Medicare: Is It Mandatory for Seniors?

Medicare is a federal health insurance program for individuals aged 65 and older, as well as for those with certain disabilities, end-stage renal disease (ESRD), or Lou Gehrig's disease (ALS). Understanding Medicare can be confusing and complicated, especially for seniors. In this article, we will address one of the most common and important questions: Is it mandatory to sign up for Medicare when you turn 65? We will explore the available options, the circumstances that might affect your decision to sign up, the possibility of opting out, and the potential consequences of choosing not to enroll.

Who is eligible for Medicare?

For many U.S. citizens and legal residents, Medicare is unique to individual circumstances. Most individuals will be eligible for Medicare when they reach the age of 65, while others may qualify earlier if they have a disability, ESRD, or ALS.

The core of Medicare consists of Medicare Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage Plans), and Part D (prescription drug benefits). Individuals who qualify due to disabilities or medical conditions may be automatically enrolled before age 65. Others will need to decide whether to opt into Medicare benefits. It's always best to consult the Social Security office to confirm your enrollment status.

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Is enrolling in Medicare mandatory?

Is Medicare mandatory? No, technically, it is not. However, delaying or opting out of the Medicare benefits when you're eligible may have consequences. The primary consequence of delaying Medicare benefits is a financial penalty imposed on Part B and/or Part D premiums. If you delay either of these benefits after which time you are deemed eligible, when you decide to opt in, said penalty will be assessed and added to the monthly premium.

Medicare calculates the Part B late enrollment penalty at 10% for each 12-month period you delayed enrollment, while the Part D late enrollment penalty is 1% of the average Part D premium for each month delayed. These penalties will be assessed to the premium for as long as you have one or both.

While most individuals either paid into Medicare while working or receive it before aging due to disability, ESRD, or ALS and don't have a premium for Part A, a small portion of people have to buy into Part A, and a 10% penalty will be assessed for each year not enrolled. Before we move to looking at what an assessed penalty looks like added to your Part D or Part B, let's discuss what circumstances allow seniors to delay Part B or Part D without being assessed a penalty.

Situations that allow for opting out or delaying Medicare without penalty

Below are some of the more common coverages that will exempt an individual from the late enrollment penalty if they decide to delay or opt out of Medicare Part B and D.

  • Employer Coverage
  • TRICARE 4 LIFE
  • CHAMPVA
  • VA Benefits (Part D only)
  • Medicaid
  • Prescription Drug Low-Income Subsidy (Part D only)

Example of Part B and Part D penalty

Part B: If you waited two full years to sign up for Part B, Medicare will assess a 20% (10% x 2 years) to your Part B premium ($174.70) for the remainder of your benefits.

$174.40 + $34.94 = $209.34 (Part B premium w/assessed penalty)

Part D: If you waited 14 months to sign up for a Part D plan after being eligible for Medicare, you will be assessed a 14% (1% x 14 months) late enrollment penalty. The national average part D plan premium in 2024 is $34.70. So, with this data, we can determine the penalty:

$34.70 x 0.14 = $4.86 (rounded up to nearest 10th)

Therefore, $4.90 will be added to your Part D plan premium per month.

Benefits of signing up for Medicare on time

Taking a minute to focus on the positive aspects of signing up for Medicare on time, we can begin with perhaps the most crucial benefit: avoiding gaps in medical or prescription drug coverage. Such gaps could result in significant costs if an unexpected medical event or diagnosis were to arise during a period of being uninsured.

Medicare can be an affordable solution when individuals become eligible. Not only are Medicare A and B with Part D Plan an option, but there are also Medicare Supplement and Medicare Advantage plans available, with some Medicare Advantage Plans having $0 premium. Information about these options can be found on Medicare.gov or by speaking to a licensed health insurance advisor.

When and how to enroll in Medicare

Periods in which individuals are able to enroll in Medicare and Medicare plans are called Enrollment Periods. Medicare names these enrollment periods differently to indicate what a Medicare-eligible person can and can't do regarding Medicare plans. In this article, we will only be discussing the enrollment periods in which an individual can join Medicare Part A and B for the first time:

  • Initial Enrollment Period (IEP). Generally, when you turn 65, the Initial Enrollment Period (IEP) starts three months prior to the month you turn 65 and the three months after your 65th birth month for a total of seven months. If you miss your seven-month Initial Enrollment Period (IEP), you may be forced to wait to sign during the General Enrollment Period, which is from Jan 1 to March 31 each year.
  • Annual Enrollment Period (AEP). This enrollment period is available to Medicare eligibles from Oct 15th–Dec 7th. Individuals can enroll in Medicare if they missed their IEP or enroll or disenroll in Medicare Part C (Medicare Advantage plans) or Part D (Prescription Drug plans).
  • General Election Period (GEP). This enrollment period is generally used when seniors miss their Initial Coverage Period (IEP) or Annual Election Period (AEP). Special Election Periods may be available for enrollment or exempt someone from paying a late enrollment penalty.
  • Special Enrollment Period (SEP). These enrollment periods are designed for individuals with extenuating circumstances that may allow them to enroll in Medicare or Medicare Plans outside of the designated enrollment period. They are not guaranteed, so please contact an expert to assist.
  • Open Enrollment Period (OEP). Individuals may move from a Medicare Advantage plan to another Medicare Advantage plan or from a Medicare Advantage plan back to the original Medicare and Prescription Drug plan.
How to enroll in Medicare
You can visit the Social Security Administration website at www.ssa.gov, go to your local Social Security Office, or call them at 1-800-772-1213.

Keep in mind that if an individual is not getting Social Security benefits, Medicare won't send any enrollment forms in the mail, you will have to contact the Social Security Administration on your own.

Wrapping things up

Medicare typically starts when someone turns 65. During this time, they have three months before and after their 65th birth month to enroll in Medicare Parts A, B, and D without facing expensive penalties later on, unless they already have credible coverage such as employer coverage, Veterans Benefits, or Medicaid.

If you miss this period, you may be forced to wait until the Annual Enrollment Period (Oct 15th–Dec 7th) for a Jan 1st effective date. If you miss this enrollment period, you may have to wait until the following year to enroll during the General Election Period (Jan 1st–March 31st), leaving you exposed to costly medical bills and possibly a financial penalty. For those individuals with certain disabilities, such as Stage Renal Disease or ALS (Lou Gehrig's Disease), you will be eligible for Medicare prior to turning 65 but will have the same enrollment penalties available to them.

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