Today, we’re going to answer the question, “Who really needs Medicare?” In other words, who really should take Medicare when they turn 65? This is a common question we hear from people approaching 65. The reality is, some of you should get on Medicare at 65, while others of you should not take Medicare at 65. We’ll dive into the reasons why, and hopefully help you decide if you need to get on Medicare at 65. 

Turning 65 and Covered by Employer Plan

If you're turning 65 and are covered by an employer plan (i.e. either you or your spouse is working), you may not want to take Medicare at 65. Some of the reasons why you should stay on an employer plan instead of taking Medicare include the following:

  • Your employer-provided plan is priced well 
  • It offers good coverage
  • Your spouse is younger than you and is covered by the group plan
  • Your children are still covered by the group plan

If any of these scenarios is true for you, it may not be in your best interest to take Medicare at 65. 

However, even if you are working and have group plan benefits, sometimes getting on Medicare will be your best option. Some of the reasons you might want to switch from your employer-provided plan to Medicare include:

  • Your work’s group plan has a high deductible (anything between $2,000 to $5,000 is considered high). 
  • Your group plan has a high premium ($250 + per month).
  • It doesn’t provide good coverage. 
  • It does not include spouses or children, so they won’t be affected if you switch to Medicare.

In these cases, switching to Medicare at 65 (even if you’re working and have group plan benefits) is a great option. 

Turning 65 and NOT Covered by Employer Plan

The #1 reason you want to take Medicare at 65 is if you do not have an employer plan available (meaning you or your spouse is not working). If this is true of your situation, you will need to start Medicare at 65. 

The second reason you’ll need to start Medicare at 65 is if you have a retiree plan. Why? Retiree plans are secondary payors. So once you’re Medicare eligible, your retiree plan will only pay after Medicare (or you) pays first. This means if you have a retiree plan and don’t enroll in Medicare A and B at 65, you will be in the first payor position (instead of Medicare), which places you in great financial risk. 

The third reason to start Medicare at 65 is if you’re on an ACA plan (Affordable Care Act plan). This means you went to the health care exchange or healthcare.gov website and you purchased a plan through the ACA system. If this is you, you can keep your ACA plan when you turn 65, but all the benefits of the ACA plan will go away. 

In other words, the tax subsidies, cost-sharing, and low premiums will no longer apply to you. Once you turn 65, you will have to pay the full cost for the plan. Unfortunately, ACA plans are typically high-deductible, meaning you’ll end up paying for a lot of your health services out of your own pocket. In short, if you have an ACA plan and are turning 65, it is in your best interest to get rid of the ACA plan and take Medicare. 

Lastly, if you’re turning 65 and have no insurance whatsoever, you should definitely go on Medicare. Medicare provides very good coverage at a reasonable cost. Plus, if you’ve paid into the Medicare system for at least 40 quarters, Medicare Part A will be completely free to you. So it really makes sense to take advantage of it and enroll when you turn 65.

Why You Need Medicare (If Not on Employer Plan)

Now let’s look at some of the problems that will surface if you don’t have an employer plan and fail to take Medicare at 65. 

You’ll Be Uninsured

First, you need to take Medicare at 65 because if you don’t, you’ll be uninsured. Here’s the thing, you may be healthy right now, but things can change quickly. You could have a surprise diagnosis or need surgery sometime in the near future. If this happens and you’re uninsured, you’ll be paying 100 percent out of pocket. In short, by not taking Medicare at 65, you're putting yourself in a tremendous amount of financial risk. 

Enrollment is Limited

The second reason you need to take Medicare at 65 (if you’re not on an employer plan) is that enrollment in Medicare is very limited. A lot of people think they can wait to take Medicare when they get sick. The truth is, it doesn’t work that way. You can't come into Medicare any time you want. In fact, if you don’t enroll at 65, the only way you can get into Medicare is by taking advantage of the enrollment period every year between January and March. 

Let's suppose you don’t enroll in Medicare at 65. Unexpectedly, you have a serious health issue come up in April. You'll have to wait until the following year’s first quarter to enroll in Medicare. And once you enroll in Original Medicare (during the first quarter of the next year), you won’t be able to purchase certain additional coverage plans until October through December. So as you can see, if you miss your eligibility at 65, there are very limited opportunities for you to enroll after the initial enrollment period. 

Part B and D Penalties Will Apply

The third and final problem you could face if you don’t enroll in Medicare at 65 is Part B and D penalties. Part B Medicare is your original Medicare outpatient coverage. Part D is prescription drug plans. 

If you don't take Medicare when you're first eligible at 65 (meaning you don’t have a work plan), then you will have a penalty added to your Part B premium. Here’s how it works: Every year you go without Medicare when you should have taken it, a 10 percent penalty is added to your future Part B premium. So if you wait to enroll in Medicare Part A and B for two years, you’ll pay an extra 20 percent on your Part B premiums for the rest of your life. 

Drug plans penalties are one percent per month. So if you go without a drug plan for two years, you’ll have a 24 percent penalty added to your drug premiums for the rest of your life. 

Now keep in mind, if you or your spouse are still working, no penalties will be added. The penalties are only added if you fail to take Medicare when you retire or turn 65 and you (or your spouse) are not working. 

Pre-Existing Conditions May Apply

Lastly, if you don’t enroll in Medicare at 65, pre-existing conditions may keep you from getting coverage later. There are certain times when insurance companies have to accept you, but if you miss these windows of opportunity, the insurance company will make you go through medical underwriting to qualify for their plan. If you enroll at 65, you won’t have to worry about pre-existing conditions or medically qualifying. 

Conclusion

So back to our original question, “Who really needs Medicare?” If you're covered by an employer-provided plan, you may not need to get on Medicare when you turn 65. You’ll want to compare Medicare with your group plan to see which option is best for you. 

If you’re not on an employer-provided plan, you absolutely need to take Medicare when you turn 65. If not, you’re placing yourself in a financially risky position, you may not be able to enroll when you need to, you could have penalties assessed to your Part B and D premiums, and you may have a hard time getting coverage due to pre-existing conditions. 

We understand how difficult making the right Medicare decisions can be. To take the next step, watch our full course here, or schedule a free one-on-one call with a certified Medicare School Guide who can answer your questions, compare plans options, and even help you enroll. Click here to get started.

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