Key Takeaways

  • Medicare isn’t free. For some people who are still working with employer based health and prescription drug coverage, it may make sense to delay enrolling in Medicare. 

  • It is important to know that there may be penalties for delaying enrollment in Medicare, so you should contact your employer or the local State Health Insurance Assistance Program for answers related to your specific situation.   

Note: This article provides general information only for your consideration. For assistance or questions about your specific situation, please contact you local State Health Insurance Assistance Program (SHIP), or contact your employer. Delaying enrollment in Medicare can result in lifelong penalties if certain conditions are not met. Please seek advice specific to your specific situation.  

Medicare is a health and prescription drug insurance program for people who are over age 65, and some younger people with disabilities. Although you pay into Medicare during your working years, most Medicare benefits are not free. People have to pay premiums, co-payments/co-insurance and deductibles. Because there are costs to Medicare, it is important to know that not everyone needs to enroll in Medicare when they first become eligible.  

If you are still employed when you turn 65 it may be more beneficial to continue on an employer’s plan until you are ready for retirement. There are Special Enrollment Periods (SEPs) that allow most actively employed people with employer healthcare coverage to delay enrollment in Parts A, B, C and D without incurring penalties.  

Some people continue employer health insurance and also enroll in Medicare, believing there will be fewer out-of-pocket expenses for care with two policies. That’s not necessarily true. 

There are two key considerations when deciding whether to enroll in Medicare upon eligibility or to delay until retirement:  

  1. If you or your spouse is still actively working for a company with at least 20 full-time employees the provides health insurance and drug coverage, you are most likely eligible to delay enrollment in any of the parts of Medicare until you or your spouse retires — with a few exceptions. 
  2. If your insurance is COBRA or TRICARE, or if you work for a company with fewer than 20 employees, then consider Medicare when you are initially eligible at age 65. 

When is My Special Enrollment Period?

There are advantages to delaying enrollment in some or all of the parts of Medicare. 

  • For most people (those with insurance through an employer with 20-plus employees), the employer's health insurance will probably be the primary payer with Medicare being the secondary payer. 
  • As a secondary payer, Medicare will only pay a bill if the primary insurance (from the employer) pays less than what Medicare would have paid if it were primary. 
  • Employer health insurance typically covers more of the cost than Medicare, which results in Medicare not making a payment. This means little cost savings from having Medicare in addition to the employer’s plan. 

Consider the following example 

A general practitioner bills $437 for an outpatient office visit but the employer has a generous health insurance policy, so the visit is discounted to $250 — and they pay 100% of it. In this example, the employer’s health insurance plan serves as the primary payer. If Medicare was the primary form of health insurance, Medicare Part B would discount the visit to $200 (known as the Medicare Assignment amount) but would only pay 80% of it. Therefore, Medicare would cover $160 of the visit (80% of $200), leaving a remainder owed of $40 (known as the 20% coinsurance). With both forms of coverage, Medicare would pay nothing because the employer’s insurance plan (the primary payer) would have already paid the full $250. 

This example demonstrates it can be more cost-effective to retain employer health insurance rather than switching to Medicare when turning age 65, as the employer insurance will usually cover more costs than Medicare. This is why it may be unnecessary to have Medicare in addition to employer insurance. 

Sometimes it is best to delay enrollment in Medicare until retirement. Depending on circumstances, it may be beneficial to enroll in parts, but not all, of Medicare. Enrolling in Part A upon initial eligibility may make sense as it is free for most people. However, given the monthly premium for Medicare Part B (in 2021 $148.50 or higher per month), enrolling in Part B right away may not be worth the extra cost if employer insurance already covers more of the medical costs than Medicare. It is important to discuss Medicare options with the employer in order to determine the best solution. 

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