Age 65 may not be when you're eligible for your complete monthly Social Security benefit. But at that point, Medicare should be on your radar.
Your initial Medicare enrollment window starts three months before the month of your 65th birthday, and it ends three months after that month. If you don't enroll during that seven-month period, you could face a host of unfavorable consequences, like these.
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1. A Part B surcharge
There's a standard monthly premium Medicare Part B enrollees pay for coverage that changes every year. And some Part B participants pay even more due to having higher incomes.
If you don't sign up for Medicare on time, you'll face a 10% surcharge on your Part B premiums for each 12-month period you were eligible for coverage but didn't enroll. And that surcharge will remain in effect for the rest of your life.
2. A Part D surcharge
It's not just Medicare Part B that might hit you with a surcharge for a late enrollment. If you go 63 days or more without Part D drug coverage, or without another type of creditable prescription drug coverage (meaning, coverage that's expected to pay as much as Medicare), you risk lifelong surcharges on Part D as well.
Now unlike Part B, there's no standard monthly premium for Medicare Part D. That's because there are different plans to choose from, and your costs will depend on your specific coverage. But no matter what Part D plan you start out with, or what plans you switch to in the future, that surcharge will get tacked on to your costs.
3. A lack of coverage
If you're enrolled in a qualifying group health plan at the time of your initial Medicare enrollment window, you won't have to worry about facing the aforementioned surcharge for a late enrollment -- at least not right away. In that situation, you'll get a special enrollment period to sign up, and if you enroll within that window, surcharges won't apply. A qualifying group health plan is generally considered one with 20 employees on it or more.
Meanwhile, if you have employer coverage at the time of your initial Medicare enrollment window, but it's not a qualifying plan, not only do you face lifelong surcharges for a late enrollment, but you risk a serious gap in coverage. Often, in this situation, you'll effectively be forced to sign up for Medicare at age 65, because if you don't, your employer plan might pay less -- or nothing -- for your care.
And warning: Your plan may not actually notify you of this, even though it should. You might find out when your plan rejects a claim for services you received, leaving you in quite a pickle.
Now, you are allowed to keep your employer health plan after enrolling in Medicare. But in this case, Medicare will serve as your primary insurance, and your employer plan will serve as secondary insurance.
The amount of benefit you get from your employer plan, though, may be limited in that situation. So if that coverage is free, you might as well keep it. But if it's not free -- meaning you're charged a premium that comes out of your monthly paycheck -- you may want to dump it and stick with Medicare alone.
For some people, delaying Medicare enrollment beyond age 65 makes sense. But be mindful of these consequences if you're not on a qualifying group health plan at the time of your initial enrollment window.
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