Each year, thousands of people who fail to sign up for Medicare once they turn 65 are hit with lifetime penalties that could significantly increase their costs.
The issue, affecting 779,400 Medicare beneficiaries in 2021, largely stems from confusion and unfamiliarity of the rules, advocates for senior citizens say.
The Medicare Act requires people to enroll in the federal health insurance program within three months after turning age 65, unless they have qualified insurance through their or their spouse’s employer, or if they meet certain other exceptions.
Most people qualify for hospitalization coverage, known as Part A, at no cost. Coverage for doctor visits and medical tests, known as Part B, has a monthly premium, which was $170.10 this year.
The premium for Medicare prescription coverage, known as Part D, which must be purchased separately from a private insurer, varies. The average this year was about $32 a month.
The Part B penalty is 10% of the premium for each year a person did not have coverage.
Prescription coverage is optional, but if retirees do not obtain a plan within 63 days of when first eligible for Medicare and later seek to enroll, they will have to pay a penalty of 1% of the national average premium for each month they did not have coverage. The penalties for Parts B and D are added to the monthly premiums for life.
Stephanie Miller, the Lackawanna County coordinator for Pennsylvania Medicare Education and Decision Insight, a state program that offers free Medicare counseling, said many people unwittingly make mistakes because the penalty rules have many caveats that make it difficult to understand.
For instance, people who are still working at age 65 and have qualified coverage through their employer can seek a waiver of the Part B coverage and premiums for themselves and their covered spouses.
The rules differ for people who have medical benefits through a retirement plan, Miller said. Those plans are not considered qualified coverage, so retirees and/or their spouses would face a penalty if they ever lose coverage or voluntarily drop coverage to go on Medicare, Miller said.
That situation most often affects spouses, she said. Many retirement-based plans end medical coverage for spouses when the retired employee dies.
“If your spouse dies and you lose insurance, you will face the penalty,” Miller said.
The prescription plan penalty also snags many people, particularly those who retire at 65 but, because they are not taking any prescription medications, do not sign up for a prescription plan, said Diane Brown, a Pennsylvania Medicare Education and Decision Insight volunteer counselor.
“What happens is they are on Medicare and not on any prescriptions,” Brown said. “They think, why should I pay a premium for Part D?”
Robert Staples, 71, of Scranton, faced that situation. He signed up for Medicare’s hospital and physician coverage at age 65, but never bought a prescription plan until this year.
“I was not on any drugs so I figured the heck with it, at the time,” Staples said. “I…