Teresa McUsic

If you’re near 65, here’s how to sign up for Medicare and avoid penalties

If you turn 65 and are yet collecting Social Security, you need to sign up for Medicare, the federal healthcare program for seniors.
If you turn 65 and are yet collecting Social Security, you need to sign up for Medicare, the federal healthcare program for seniors. AP

They say the devil is in the details. And that is certainly true when signing up for Medicare for the first time.

If you are already collecting Social Security by age 65, you will automatically be signed up for Medicare and receive a welcome package around your birthday.

But if you haven’t started collecting, and don’t intend to take benefits until after age 65, you are on your own to sign up for the federal healthcare program.

Around one in six Americans are working past the traditional retirement age of 65, said Bob Moos, spokesman for the Centers for Medicare and Medicaid in Dallas.

That number is expected to grow. Nearly six in 10 people in their 50s recently said they either plan to work past age 65 or never retire, according to a survey by the TransAmerica Center for Retirement Studies.

“Some people feel as though they need to continue working financially, but quite a few of the boomers want to stay engaged and active by continuing working,” Moos said.

Another reason many people want to work is that full retirement benefits from Social Security don’t come until age 66 (and in 2027 that changes to 67.) At the same time, if you forgo Social Security enrollment until 70, you get a boost in your monthly benefit.

But you’re still eligible for Medicare at 65, so the two programs are no longer in sync.

If you’re still working at age 65, it is important to check out whether you should start Medicare by talking to your company’s human resources manager or health plan administrator, Moos said.

“That’s also true for anyone turning 65 and receiving healthcare through a working spouse’s group plan,” Moos said.

Your “initial enrollment period” runs from three months before you turn age 65 to three months after.

Most workers will want to sign up for Medicare’s Part A, which usually has no monthly premium if you have been paying into the system as a worker. It covers hospital stays, skilled nursing, home health services and hospice care.

There is one big exception to this rule, however. Moos said if your employer coverage includes a high-deductible health insurance plan with a health savings account (HSA), you will not want to enroll in Part A. IRS rules do not allow you to contribute to that HSA once you start Medicare.

Signing up for Medicare Part B, which covers doctors and other outpatient services and has a monthly premium, depends mostly on how large your employer is, Moos said.

Twenty is the magic number here.

“If your or your working spouse’s company has 20 or more employees, your employer-provided insurance will remain your primary coverage and will pay your bills first,” Moos said. “You can delay enrolling in Part B until you stop working.”

But if your company has fewer than 20 workers, Medicare will become your primary coverage, and your employer coverage will be secondary, so you should sign up for Part B, Moos advises.

If you’re 65 and can prove in writing through your company that you are insured, you can delay signing up for Medicare until you’re fully retired, Moos said. You have a special enrollment period of eight months after retirement for Part A and B; two months for Part D.

But if you don’t sign up at 65 or during your special enrollment period after retirement, there is a price to pay.

Penalties are spelled out in the Medicare handbook, “Medicare and You,” which is updated every year and can be downloaded from Medicare.gov.

The Part B penalty is up to 10 percent of the monthly premium for every year you’re eligible that you didn’t have coverage. So if you didn’t sign up for two years, you would have to pay a 20 percent penalty for the rest of your life.

Part D’s penalty is smaller, just 1 percent of the average monthly cost of a plan (which is around $33) for every month not covered by a drug plan.

Bottom line: The federal government really wants you to have health coverage and to use this program when your employer no longer provides it. So find out before you turn 65 what your options are.

To enroll in Medicare, contact Social Security at 800-772-1213 or www.socialsecurity.gov. To learn more about how your employer health plan works with Medicare, go to www.medicare.gov/publications and view the booklet “Medicare and Other Health Benefits: Your Guide to Who Pays First.” Or call 800-633-4227 to request a free copy.

Teresa McUsic’s column appears Saturdays. TMcUsic@SavvyConsumer.net