Medicare Mistake #2: Forgetting to Sign Up for Medicare at Age 65

In our first article in the Medicare Mistakes Series, we dispelled a common misconception that Medicare health coverage is free. In Mistake #2, we’re going to address an equally important topic, getting enrolled on time and avoiding penalties.

Medicare is a confusing topic. With so many moving parts, dates, deadlines, and options, it’s easy to miss a detail or two. Unfortunately, some of those little details can end up costing you money, coverage, or both.

Medicare is not a health insurance policy that you can turn on and off like a switch. After all, this is the government we’re talking about. It’s a rigid beast. It has various open enrollmentIn health insurance, open enrollment is a period during which a person may enroll in or change their selection of health plan benefits. Health plan enrollment is ordinarily subject to restrictions.... periods, and the government wants you to follow them.

If you are thinking of delaying Medicare for a few years, maybe because you are healthy or don’t want the added expense, think again. Make sure you consider and fully understand the consequences of delaying enrollment if you do not have group health coverage through an employer.

The federal government has the power to charge you enrollment penalties if you miss your IEP and other enrollment windows. t only will you not have coverage if you delay enrollment, but you will pay more when you do enroll.

Your Initial Enrollment Period (When You Should Enroll)

For some people, Medicare enrollment happens automatically, and for others, it doesn’t. Regardless, IEP is the same, whether you’re a retiree already or not.

Your Initial Enrollment Period is a seven-month rolling period that includes:

• The 3 calendar months before your 65th birthday
• The month of your 65th birthday
• The 3 calendar months after your 65th birthday

During your IEP you can enroll in Medicare Part A and Medicare Part BMedicare Part B is medical coverage for people with Original Medicare. It covers doctor visits, specialists, lab tests and diagnostics, and durable medical equipment. Part A is for hospital inpatient care..... You may also join a Medicare Part DMedicare Part D is Medicare's prescription drug plan program. Plans are offered by private insurance companies and cover outpatient prescriptions.... prescription drug plan or a Medicare Advantage planMedicare Advantage (MA), also known as Medicare Part C, are health plans from private insurance companies that are available to people eligible for Original Medicare (Medicare Part A and Medicare Part B).... (Medicare Part C) to replace your Original MedicareOriginal Medicare is private fee-for-service health insurance for people on Medicare. It has two parts. Part A is hospital coverage. Part B is medical coverage.... with private health insurance.

If you plan to keep your Original Medicare, your IEP is also when you can buy Medicare supplement insuranceMedicare Supplements are additional insurance policies that Medicare beneficiaries can purchase to cover the gaps in their Original Medicare (Medicare Part A and Medicare Part B) health insurance coverage.... (aka, Medigap) from insurance companies with guaranteed-issue rightsGuaranteed-issue is a right granted to Medicare beneficiaries and applies to Medicare Supplement insurance (aka, Medigap plans). All states and the federal government enforce this essential right, which protects Medicare beneficiaries from medical underwriting..... This right guarantees that you can purchase supplemental insurance without going through medical underwriting (i.e., you can’t be turned down). This is critical if you have one or more chronic health conditions.

NOTE: If you live in Puerto Rico you will not receive Medicare Part B automatically. You will need to sign up for it during your IEP.

Late Enrollment Penalties (Why Medicare Has Them)

When the Medicare program was signed into law in 1965, Congress realized that it would need a stick to get healthy people to join. After all, most people don’t like the idea of spending money on something they don’t use. So the law gives the Centers for Medicare & MedicaidMedicaid is a public health insurance program that provides health care coverage to low-income families and individuals in the United States.... Services and the Social Security Administration the power to assess penalties. After all, if only unhealthy people enrolled, the cost for these people would skyrocket.

Three of the four parts of Medicare have potential penalties, A, B, and D. These penalties affect your monthly premiumsA premium is an amount that an insurance policyholder must pay for coverage. Premiums are typically paid on a monthly basis. In the federal Medicare program, there are four different types of premiums. ..., not the deductiblesA deductible is an amount a beneficiary must pay for their health care expenses before the health insurance policy begins to pay its share...., copaymentsA copayment, also known as a copay, is a set dollar amount you are required to pay for a medical service...., or coinsuranceCoinsurance is a percentage of the total you are required to pay for a medical service. ... you pay when you use your Medicare benefits.

Medicare Part A Late Enrollment Penalty

Most people (and their spouse) get their Medicare Part A coverage (hospital insurance)  premium-free by working 10 or more years and paying Medicare taxes. However, if you didn’t pay Medicare taxes for a minimum of 40 quarters (10 years), then you will pay a monthly premium for your Part A coverage. A penalty may apply for late enrollment.

If you miss your IEP or intentionally delay Medicare Part A enrollment:

• Your Part A monthly premium will be increased by 10%.
• The 10% penalty will continue for twice the number of years you were not enrolled when you were eligible.

Medicare Part B Late Enrollment Penalty

Everyone eligible for Medicare pays a Medicare Part B premium, for their medical insurance, when they enroll. Medicare taxes collected during employment only apply to Part A for hospital inpatient coverageMedicare Part A is hospital inpatient coverage for people with Original Medicare, whereas Part B is medical coverage for doctor visits, tests, etc...., but not for Part B coverage, and late enrollment penalties apply.

If you do not enroll in Medicare Part B when you are first eligible:

• Your Part B monthly premium will increase 10% for each 12-month period that you are not enrolled.
• You will pay a higher premium for the remainder of your life.

Medicare Part D Late Enrollment Penalty

The Medicare prescription drug coverage program was added in 2003 to help aging seniors and people with Social Security Disability Insurance afford their prescription medications. Even though a Part D insurance plan is optional private insurance, CMS created a penalty structure to encourage people to join when first eligible.

If you do not join a Medicare Part D plan when you are first eligible:

• Your Part D monthly premium will increase by 1% of the national base beneficiary premium average multiplied by the number of months you were not enrolled.
• In most cases, you will pay the premium for as long as you have Part D coverage.
• If you receive the Extra Help benefit from Social Security you will not pay the penalty.

Do Late Enrollment Penalties Apply When Employed?

Many of us work well past our 65th birthday, and Medicare takes this into account. If you are employed and your employer provides creditable health insurance, you can delay enrollment. However, it is not safe to assume that 100% of your employer coverage is creditable. It is highly advisable to call Medicare and confirm that you are in compliance.

When your current employment group health plan coverage ends you have the option to use COBRA to bridge the gap between your employer’s group coverage and Medicare. You’ll need to add Part B within eight months of the earliest of either the end of your employment or the end of your group health coverage.

If you have a Health Savings Account (HSA) with a high deductible health plan through your or your spouse’s current employment, you may be eligible for a Special Enrollment Period (SEP). In this case, to avoid a tax penalty you must stop contributing to your HSA at least 6 months prior to enrolling in Medicare.

How to Enroll in Medicare During Your IEP

If you receive Social Security, Railroad Retirement Board (RRB), or other federal retirement benefits four or more months prior to your 65th birthday, in most cases the Social Security Administration (SSA) will automatically enroll you in Part A and B. In this case, the SSA will send you a notice prior to your eligibility date.

If you are not automatically enrolled, you must use the SSA website to start your enrollment or visit your local Social Security office.  If you get enrolled during your IEP, when your coverage begins will depend on the month you enroll.

If you enroll in Medicare Parts A and B:

1. During the 3-month period before your birthday, coverage begins on the first day of the month you turn 65 (if your birthday is on the 1st, coverage begins the prior month).
2. During your birthday month, coverage starts on the first day of the next month.
3. During one of the three months after your birthday month, coverage starts on the first day of the month after you enrolled.

If you plan to stay in Original Medicare and want prescription drug coverage, you can enroll in a Part D plan as soon as you enroll in Medicare Part A and/or Medicare Part B.

RELATED: Why Medicare Advantage Plans are Bad

Alternatively, you can join a Medicare Advantage plan that includes a Medicare Part D plan. To enroll in Medicare Advantage you must first enroll in Medicare Part A and B. They will not enroll you until you have your Medicare number, which is printed on your Medicare card. In the past, it was the same as your Social Security number, but this is no longer the case. For security, your Medicare number is unique to you.

If You Missed Your IEP, Here’s What You Need To Do

Your IEP is the ideal time to enroll in Medicare. If you missed it, or if you delayed enrollment because you have creditable through your employer, your next option is the Medicare General Election Period (GEP), often referred to as the general enrollment period.

GEP is a three-month period from January through March of each year. No matter when you enroll during GEP, your coverage start date will be July 1st.

If you miss the first GEP after your IEP, you will not be allowed to enroll until the following January. That means you will be without coverage for well over a year and you will incur late enrollment penalties.

Not Enrolling On Time is a Costly Mistake

It’s important to get enrolled in Medicare during your IEP so you can begin taking advantage of the benefits you’re earned. One of those benefits is your free “Welcome to Medicare” visit. This doctor visit includes a review of your medical and social history related to your health and education and counseling related to preventive services, including:

• Certain screenings, flu, and pneumococcal shots, and referrals for other care, if needed.
• Height, weight, and blood pressure measurements.
• A calculation of your body mass index.
• A simple vision test.
• A review of your potential risk for depression and your level of safety.
• An offer to talk with you about creating advance directives.
• A written plan letting you know which screenings, shots, and other preventive services you need.

You pay nothing for the “Welcome to Medicare” preventive visit if your doctor or other qualified health care provider accepts Medicare-assignment. On this visit, the Part B deductible doesn’t apply.

As we outlined above, gaps in Medicare coverage can be costly. In some cases, penalties can be waived, but this, too, can be very costly in the time and frustration spent trying to get a waiver approved. If you need a waiver, start on this Medicare.gov page.