How to Avoid Costly Medicare Mistakes

Over 63 million Americans were enrolled in Medicare as of October 2021. Fizkes/Shutterstock

If you’re approaching 65, signing up for Medicare is looming ahead. It’s the first step to usher in retirement, and there are strict rules as to when you sign up.

If you receive your insurance through the public marketplace, it’s imperative that you sign up for Medicare on time. But are there penalties for not signing up on time?

Signing Up for Medicare

It’s common knowledge about Medicare. You’re eligible for coverage when you reach 65. Medicare’s window of opportunity is three months before your sixty-fifth birthday, the month of your birthday, and three months after your birthday.

All in all, you have seven months to sign up for Medicare. However, you may also be eligible earlier if you have End-Stage Renal Disease (ESRD) or ALS (also called Lou Gehrig’s disease).

The Medicare plans are Part A, which covers:

• inpatient hospital care
• skilled nursing facility
• hospice
• lab tests
• surgery
• home health care

You will sign up for this plan when you are 65. The other plan you are required to sign up for is Medicare Plan B. This covers:

• health care providers’ services
• outpatient care
• durable medical equipment
• home health care
• some preventive services

Any service outside those listed comes out of your pocket unless you have a supplemental insurance policy.

Penalties for Late Medicare Enrollment

You must sign up for Medicare during your initial enrollment period. The exception is if you have coverage similar in value to Medicare from an employer. Although the employer’s insurance may require you to sign up for Medicare.

You will be subject to a monetary penalty if you don’t sign up for Medicare during that seven-month window.

The penalty for not signing up for Medicare Part A is a monthly premium increase when you do sign up. The monthly premium goes up to 10 percent or twice the number of years you didn’t sign up.

The penalty for missing the enrollment window for Part B is you’ll pay an extra 10 percent for each year you could have signed up for Part B but didn’t. These penalties can last for as long as you have Medicare.

If you qualify for a Special Enrollment Period, there’s no penalty for not signing up for Part A or Part B on time. If you think you qualify for a special enrollment, you'll need to fill out Form CMS-10797.

With Part D, the prescription plan, you don’t have to enroll in Medicare if you have creditable drug coverage similar to Part D’s value.

If you don’t have similar coverage, you’ll pay an extra 1 percent each month you fail to acquire a drug plan.

Once you finally join a Medicare plan, as a late enrollee, you will be told your premium and the penalty.

Dropping Medicare Jeopardizes Retirement Benefits

If you receive a premium-free Medicare Part A you can’t drop it without consequences. You‘ll also have to drop disability, retiree (Social Security), or Railroad Retirement Benefits. And you’ll have to pay back all the benefits you received before dropping Medicare.

Marketplace Insurance Coverage

The Health Insurance Marketplace provides health insurance plans with coverage and affordability. You can purchase an insurance policy through the Marketplace.

It is also part of the Affordable Care Act (ACA). In some instances, the premium is supplemented based on income.

Late Medicare Enrollment and Marketplace Insurance Penalty

There are consequences if you are receiving a supplement for your Marketplace Insurance and fail to sign up for Medicare during the sign-up window.

First, you‘ll have late penalties for signing up late for Medicare. But you’ll also be penalized by the Marketplace. You must repay the supplement you received over the months you failed to sign-up for Medicare when you file your federal income tax return.

If you share a plan with other family members, they must re-enroll in the Marketplace plan.

But be sure to wait to cancel your Marketplace Insurance until you know the date your Medicare policy will start. You want to avoid a coverage gap.

Marketplace Insurance and Medicare

Generally, you can’t have Marketplace Insurance instead of Medicare. And you can’t use Marketplace Insurance to supplement your Medicare plan. This is because it’s against the law for someone to sell you Marketplace Insurance if they know you have Medicare.

Calpers Health Insurance Canceled at 65

The CaIPERS Health Benefit Program is the largest purchaser of public employees health benefits in California. It is also the second-largest public purchaser in the nation after the federal government.

You may continue to be enrolled in a CaLPERS Basic Health Plan if you receive your health coverage through employment status. You can’t be a retiree through employment status. If you are eligible to defer Medicare, you may also retain CaLPERS coverage.

If you wish to have CaLPERS Medicare health plan, you must be enrolled in Medicare Part B when you retire.

Be Aware of Medicare Penalties

Failing to sign up for Medicare in the seven-month period of your sixty-fifth birthday is costly. And these penalties aren’t one-time. They follow you through the rest of your Medicare enrollment.

If you’re in the Marketplace and have a premium supplement, you'll also need to watch those dates or pay the consequences.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.