Ask Liz Weston

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Medicare

Q&A: Avoiding Medicare late enrollment penalties

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Dear Liz: I have taken multiple in-person and online educational classes about Medicare prior to my 65th birthday. What I learned from these classes was that the law demands people register for Medicare Part A when we turn 65 whether we are working or not. Like the woman in your column, I also work full time and do not plan to retire until 70 (at least that is my new target date). At the time of my retirement I will apply for Medicare Part B and purchase supplemental insurance.

Answer: It’s wonderful that you made the effort to educate yourself about Medicare, which can be incredibly complicated. However, you got the wrong lesson about what’s required, since there’s no law that forces people to sign up for any part of Medicare, including Part A, which covers hospitalizations and which is typically premium-free.

The reason most people should sign up at age 65 has to do with penalties. People who delay signing up for Medicare Part B, which covers doctor’s visits, or Part D, which covers prescriptions, can face permanent, lifetime premium penalties unless they qualify for certain exemptions. One of those exemptions is having qualifying health insurance coverage from a job, either your own or your spouse’s. You can find more details at https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties.

Q&A: Medicare Part A

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Dear Liz: You recently answered a question from someone who was delaying signing up for Medicare because he had health insurance through his job. You mentioned that if the employer had 20 or more employees, he didn’t have to sign up until that employment ended. That’s correct, but there’s typically no cost for Medicare Part A so there’s no reason not to sign up.

Answer: That’s an excellent point. Medicare Part A covers hospital visits and typically is premium-free, so signing up at age 65 is a good idea even if you have insurance coverage through work. The other parts of Medicare require monthly premiums and can impose penalties if you don’t apply when you’re first eligible.

Q&A: Switching back to original Medicare

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Dear Liz: I’m 75 and I’ve been on an Advantage plan since I started on Medicare at 65. I’m interested in switching to original Medicare with a supplemental policy. I know I will have to enroll in a drug policy also. Will I be subject to any penalties for late enrollment for any of the three policies?

Answer: You won’t be subject to penalties but you will be subject to underwriting for the supplemental policy. That means the private insurance companies that offer these plans can deny you coverage or charge you more for preexisting conditions.

There are a few exceptions. Insurers can’t subject you to underwriting if you’re still within the first 12 months of having a Medicare Advantage plan, for example, or if you move out of the plan’s service area. In addition, four states — Connecticut, Maine, Massachusetts and New York — require Medigap companies to offer coverage to all Medicare beneficiaries.

Start shopping around and make sure your application for a supplemental policy has been approved before canceling your current plan.

Q&A: How to avoid Medicare late enrollment penalties

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Dear Liz: I am 65, still working and have health insurance through my employer. I have not enrolled for Medicare and have been told I do not need to. I plan to once I retire. There is a passage in my Social Security statement that says, “Because you are already 65 or older, you should contact Social Security to enroll in Medicare. You may be subject to a lifetime late enrollment penalty. Special rules may apply if you are covered by certain group health plans through work.” I have tried to research further through the Medicare website but can’t find a clear answer about whether or not I am OK not enrolling at this time.

Answer: If your employer has 20 or more employees, then you’re fine for now. When you stop working for that employer, you’ll have eight months to sign up for Medicare without owing penalties.

If you want your Medicare coverage to start when your job-based coverage ends, though, you should sign up a month before you retire. Similar rules would apply if you were covered by a spouse’s workplace health insurance plan. As long as your spouse is still working for the employer that provides the coverage, you can avoid permanent Medicare penalties.

If your employer has fewer than 20 employees, however, you may be required to sign up for Medicare when you’re first eligible. Check with your employer.

Q&A: Should you keep paying Medicare premiums if you’re moving abroad?

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Dear Liz: We are thinking of retiring to Paris. What would be the repercussions if we stop paying Medicare premiums? We’re concerned about the possibility of returning to the U.S. at some future date and the costs of reinstating it. Do we just pay back the past due payments plus a penalty?

Answer: You wouldn’t make up the missed payments, but you would owe a penalty that would permanently increase your premiums for Medicare Part B, which covers doctor’s visits, and Part D, which covers prescriptions. The penalty for Part B is 10% for every 12 months you were eligible but not enrolled. The penalty for Part D is determined by multiplying 1% of the “national base beneficiary premium” ($33.37 in 2022) by the number of months that you were eligible but didn’t enroll.

Many retirees who plan to eventually move back to the U.S. or make frequent visits opt to keep up their Medicare coverage. Consider discussing your options with a fee-only financial advisor — preferably one who has experience advising would-be expatriates. Another option when you have Medicare questions is to contact your State Health Insurance Assistance Program, which can provide free counseling.

Q&A: Revisiting a Medicare penalty

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Dear Liz: As a county employee of 44 years, I was offered the option to contribute to Social Security in the mid-1970s. It was not mandatory and I declined. When I retired in 2004, I did not apply for Medicare as I wrongly assumed that I would not qualify. I have since learned that I can apply for Medicare but that I would have to pay $499 per month as a late enrollment penalty on top of the monthly premium. Do you know any way that I can get a portion of the late penalty waived?

Answer: As your situation shows, not getting sound advice about Medicare can be expensive. Failing to sign up for Part B coverage, which pays for doctor’s visits, can incur penalties of 10% for each 12 months you were eligible but didn’t enroll. The penalties are typically permanent.

There is an appeals process, but your chances of success may not be great unless you can prove that you delayed enrollment because of bad advice you got from a government representative. Medicare has more information on its site.