65 and working: Should I Enroll in Medicare?

In today’s world, many people continue to work beyond age 65, once the normal age for retirement.  Nonetheless, 65 is still the age when people first become eligible for Medicare health insurance coverage.   A frequently asked question by those working at 65 is whether they should enroll in Medicare.  See the chart below for a summary of medical coverage provided by the different parts of Medicare.

Medicare Parts A, B, and D Coverage:
Part A Part B Part D
Hospital Insurance: Covers hospital visits, portions of skilled nursing or health care at home, and hospice care. Medical Insurance:Covers doctors’ services, outpatient hospital care and home healthcare Prescription Drug Insurance

If you are working at 65 for a company with at least 20 full-time employees and the company provides health insurance coverage, you may not need to enroll in all parts of Medicare.  Specifically, you can delay enrollment in Medicare Part B without penalty until you retire or until you lose your employer provided insurance.  If your employer has fewer than 20 employees, you should enroll in Medicare Part B when you first become eligible.  In this situation, Medicare is the primary insurer, which means it pays any claims before your employer’s insurance pays claims.  If you don’t enroll, your employer’s plan can refuse to cover you for services that Medicare would have covered. That means that you may have to pay for those services out of your own pocket.

Most people should enroll in Medicare Part A when turning 65 even if you have employer provided health insurance, as it is free for most people.  To be eligible for premium-free Part A, you must either (i) have at least 40 calendar quarters – 10 years – of service in any job in which you paid Social Security taxes; (ii) be eligible for Railroad Retirement benefits; or (ii) were a federal employee after December 31, 1982 or a state or local employee after March 31, 1986.  If you are not eligible for premium-free Part A, and you don’t enroll when you’re first eligible, you will have to pay a late enrollment penalty.  An exception to this rule exists if you are 65 with employer provided coverage and your employer does not require you to sign up for Medicare Part A.  In this case, you may delay enrollment in Part A and not pay a late enrollment penalty once you lose coverage from your employer.

For those people who have a Health Savings Account (“HSA”), neither you nor your employer can contribute to the HSA once you have enrolled in Medicare.  As you are able to contribute to an HSA on a tax-deferred basis, consideration should be given to delaying enrollment in Medicare if you can.  If you have enrolled in Medicare, you can continue to withdraw the funds already in the HSA for qualified medical expenses, but you will be penalized if any contributions are made.

Finally, another important factor to consider when enrolling in Medicare pertains to Social Security benefits.  If you are 65 and claiming Social Security benefits, you will automatically be enrolled in Part A and Part B.  This is important to understand if you have an HSA because once enrolled in Medicare, you are no longer eligible to make contributions to an HSA.

Considerations for when to sign up for Medicare:


Source: JP Morgan Insights: “Guide to Retirement”


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