Avoiding Costly Medicare Mistakes: A Medicare Customer Question

As we approach the end of the year and health insurance open enrollment, many Americans nearing or over the age of 65 may be evaluating their healthcare options for the coming year. Around 9 million workers are in that category, which means nearly 20% of U.S. adults aged 65 and older are still in the workforce.

For those workers, the questions of whether or not to enroll in Medicare — or when — may be looming large, as those working for larger employers may have established healthcare plans and be hesitant to switch. Medicare can be a viable and affordable alternative to employer healthcare at age 65 and older. However, some people make costly mistakes when enrolling in Medicare. Here are some ways to get started with your choices this Medicare season.

The Question

With open enrollment coming up in November, how long do I have to decide on whether or not to enroll in Medicare? And are there penalties for late enrollment?

The Answer

Every American becomes eligible to enroll in Medicare three months before their 65th birthday, and the enrollment window closes three months after your birthday month, unless you meet an exception that changes the window. One of those exceptions is having qualifying insurance through your employer, in which case you can wait until you lose group coverage, as will happen when you retire or if you resign.

Signing up for Medicare as soon as you are eligible is advisable for anyone without qualifying insurance, as late enrollment in Medicare comes with steep lifetime penalties. For Part B (outpatient care coverage), the penalty is 10% for each 12-month period you could have had it but didn’t sign up, while for Part D, the penalty is 1% of the base premium ($33.06 in 2021) multiplied by the number of full, uncovered months you went without Part D or creditable coverage.