Enrolling for Medicare at age 65: Truth or Dare

Approximately 4.1 million Americans will turn 65 every year from 2024 through 2027. In the months leading up to this milestone birthday, people turning age 65 are bombarded with literature about Medicare plan choices, many warning about how to avoid “costly mistakes.” But these warnings may lack crucial information and not all are clear.

No late enrollment penalty if employer-provided health insurance is available

The first unclear piece of advice warns about “enrolling late” for Medicare. “Late enrollment (after age 65) in Parts A and B will add a penalty to the monthly premium — for life! The later you enroll, the heavier the penalties.” However, one added piece of information is often left off this warning: “Workers over 65 are exempt from late penalties if they have health insurance from an employer with at least 20 employees.”

Sixty-five-year-olds who continue to work do not need to panic into enrolling for Medicare. Instead, any decision to enroll in Medicare or remain enrolled in an eligible employer-provided medical plan should be informed by careful research and consideration.

Medicare: a sum of its “Parts”

The first consideration a Medicare-eligible individual should undertake is to gain a thorough understanding of the types of Medicare, and the various coverage via “Parts.”

Medicare has become more flexible over the years to provide coverage options to meet most people’s needs, but with this flexibility comes complexity. The first distinction to be understood is the difference between Original Medicare and Medicare Advantage.

Original Medicare is comprised of two Parts: Part A, which covers inpatient hospital and skilled nursing facility care (for a maximum of 100 days, following a qualified hospital stay), and Part B, which covers most medically necessary services and supplies in hospitals, doctors’ offices and other health care facilities. An important distinction regarding Part B coverage is that participants can go to any doctor or hospital in the U.S. that takes Medicare.

But it’s key to emphasize what Parts A and B do NOT cover, as well. Part A does not cover skilled nursing facility care after 100 days, for example for an aging person who lives in a nursing home. Part B does not cover routine physicals, eye exams and most dental care. Parts A and B of Medicare must be enrolled in separately, and a premium is charged for Part B (but not for Part A).

Another important coverage that Parts A and B do not provide is for prescription drugs, leading to Medicare Part D, which helps cover the cost of prescription drugs. Enrollment into Part D is separate from Parts A and B, and a premium also is charged. Part D plans are run by private insurance companies that follow the rules set by Medicare. 

In addition to Parts A, B and D, eligible individuals can separately enroll in a Medicare Supplement Plan (also called Medigap), for an added premium. This additional insurance helps pay for the costs that Original Medicare does not cover and also is purchased from a private company. 

The alternative to Original Medicare is a Medicare Advantage Plan, also called Part C. Advantage Plans are Medicare-approved from a private company. These “bundled” plans include Part A, Part B, and usually Part D. The variety of Medicare Advantage plans also must be carefully researched, as many limit treatment to a network of available doctors, and out-of-pocket costs differ from plan to plan. They also may offer extra benefits that Original Medicare does not, such as routine physicals, eye exams, and dental care. A Part C plan may have an additional premium on top of the Part B Medicare premium already being paid; however, plans with $0 added premium are available.

Before deciding to drop employer-provided coverage and enroll in Medicare at age 65, carefully consider the coverage that each will provide. Look at the types of coverage provided, the amount of out-of-pocket costs and premiums, as well as the availability of Health Savings and Flexible Spending Accounts. These tax-advantaged savings accounts to pay for eligible medical expenses not covered by insurance only are available through an employer. Medicare recipients are not eligible for them.

So, what’s a 65-year-old to do?

First, be sure to allot a good amount of time to make the decision about when to start Medicare coverage so that there is opportunity to fully understand all the intricacies involved. As that 65th birthday approaches, a flood of information begins arriving announcing the imperative to decide two months prior to your birthday or face a potential lifetime penalty. Generally speaking, this leaves a very short amount of time to come to a decision. Remember, a 65-year-old who is continuing to work and has employer-provided health insurance available does not face a penalty, so take the time needed to carefully consider the alternatives.

Lastly, make use of the free resources available to help research Medicare coverage options and potential costs. The Medicare.gov website provides information in a variety of formats to make it accessible to all. In addition to the digital information on the website, information also is available via a printed “Medicare & You” handbook, and for those who prefer to talk to a live person, a telephone line: 1-800-MEDICARE (1-800-633-4227. An “Estimate my premium” tool also is helpful to understand Part B premiums and Income-related Monthly Adjusted Amounts, or IRMAAs. AARP also provides a robust curated Medicare guide, including details of the step-by-step enrollment process, webinars, videos and a Resource Center. Start with these two sources to help simplify the complex information surrounding Medicare, answer questions and make decision about your coverage with confidence.