If you're getting ready to turn 65, chances are you have a few questions about Medicare. One of the more common ones is whether enrolling in Medicare is mandatory when you turn 65.
Unfortunately, the short answer as to whether Medicare is mandatory is: It depends. Not very helpful, we know. But that's just because you haven't finished reading yet. This page describes when Medicare is mandatory (if you don't want to pay penalties) and when you can wait to enroll.
Are you retired?
Most people who are retired need to sign up for Medicare when they turn 65. However, if you have employee-sponsored insurance through your spouse, you may be able to delay. (See the next section for full details.)
If you belong to a retiree health plan, you still need to sign up for Medicare. If you decide to keep your retiree plan, Medicare is the primary payer and your retiree plan pays second.
If you chose a COBRA plan after retirement, you need to sign up for Medicare and cancel your COBRA coverage (unless you want to keep it for any dependents).
For those who retired and chose to buy insurance through the Affordable Care Act (ACA, commonly referred to as Obamacare), you need to sign up for Medicare. Once you do, make sure you cancel your ACA coverage. Technically, you could keep your Healthcare Marketplace plan. However, once you qualify for Medicare, you lose the subsidies that make those plans affordable. If you have dependents on your Marketplace plan, they can keep their coverage and should still qualify for the same subsidies.
The only time you can choose to keep your ACA plan over Medicare is if you will owe a monthly premium for Part A. However, please note that Medicare eligibility nearly always means you will lose any subsidies that make your ACA plan more affordable.
Do you have employee-sponsored health insurance?
If you have health insurance through an employer (yours or your spouse's), you may be able to delay enrollment without incurring late penalties. It depends on the number of employees at your company.
For convenience, we refer to "your" employer. Please note that the following is also true if your coverage is through your spouse's employer. Also, all information assumes you or your spouse are an active employee, i.e. not retired.
If there are fewer than 20 employees, you must enroll in Medicare (Parts A and B). You may keep your current insurance, which becomes your secondary plan. But please note that, unless you meet certain income requirements, you have a monthly premium for Medicare Part B.
You have choices if your company employs more than 20 people. You may delay enrollment until you either retire or lose your coverage. Or, you may enroll in Medicare Part A only, or choose both parts. If you keep your current coverage and enroll in Medicare, Medicare becomes the secondary payer, leaving with little to no out-of-pocket costs.
Since it's usually free, we nearly always recommend enrolling in Part A as soon as you become eligible. One exception is if you contribute to a health savings account (HSA) and want to continue making those contributions. You may not enroll in Medicare and contribute to an HSA at the same time. You can, however, continue withdrawing from an HSA after signing up for Medicare.
If you're still working when you turn 65, we highly recommend talking to your organization's benefits administrator. He or she should have a comprehensive understanding of your current plan.
What happens if you don't sign up for Medicare?
Medicare's viability relies on people enrolling once they turn 65. The program helps encourage participation by levying late penalties against those who don't.
A full 12 months must pass from the time you became eligible before you accrue any penalty in Part A and B.
If you delay Medicare enrollment, the only way to avoid late penalties is to qualify for a Special Enrollment Period (SEP). In the above scenarios, having qualifying insurance through an employer makes you eligible for an SEP.
Part A Late Penalties
Most people get premium-free Medicare Part A. However, if you or your spouse did not pay Medicare taxes for the required 40 quarters (10 years), you have a monthly premium.
The late penalty for Part A is 10 percent of the monthly premium for twice the number of years you could have enrolled but did not. So, if you enroll in Part A 14 months after your 65th birthday, you pay a 10 percent penalty for two years. However, if you only wait 11 months, there is no penalty.
Part B Late Penalties
The late penalty for Part B is 10 percent of your monthly premium for every year you delayed enrollment. So, 10 percent for one year, 20 percent for two, and so on.
Unlike Part A, Part B penalties are payable for the entire time you have Medicare.
Part D Late Penalties
Late fees for Medicare Part D are different. First, you can only go 63 days without having creditable prescription drug coverage before you incur penalties.
The Part D penalty changes every year with the national base beneficiary premium (as determined by the Center for Medicare & Medicaid Services, or CMS). The fee is 1 percent of the premium multiplied by the number of months you went without coverage. That total is then rounded to the nearest dime.
In 2023, the national base beneficiary premium is $32.74. So, if you went 10 months without coverage, the calculation looks like this:
($32.74 x 0.01) x 10 = 3.274
Rounded to the nearest dime, your late penalty is $3.30. This amount is added to your monthly premium for the entire time you have Medicare Part D.
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