6 Medicare mistakes to avoid if you’re working past age 65

For many years, people became eligible for Medicare and Social Security at the same time — age 65. But in the 1980s, Congress passed a law to gradually raise the full retirement age for Social Security because people are living longer.

That’s made things tricky for Americans working past age 65. Unlike Social Security, you still become eligible for full Medicare benefits at 65.

Medicare encourages people to enroll around their 65th birthday — whether they’re working or not. But in some cases, you may choose to delay Medicare enrollment if you’re still working, or receive benefits from your employer and Medicare at the same time.

Here’s what you need to know about your health care options if you’re working past age 65, along with some common Medicare pitfalls to avoid.

Do you need to enroll in Medicare at age 65 if you’re still working?

Depending on the size of your employer, you might be required to sign up for Medicare when you turn 65 years old, or you might be able to postpone enrollment until you retire.

If your company employs more than 20 people

If you work for an employer with 20 or more workers that offers group health insurance, you have three options:

• Receive employer coverage and Medicare at the same time.
• Decline employer coverage and only receive coverage from Medicare.
• Accept the employer health plan and postpone Medicare enrollment.

If you choose to receive Medicare, you’ll need to sign up during your initial enrollment period, which begins three months before your 65th birthday, includes your birth month and extends three months after that.

The same applies if you choose to enroll in Medicare and keep your current employer coverage at the same time. In that situation, your workplace plan will pay your medical costs first and Medicare will act as the secondary payer.

If you decide to only receive your employer coverage and delay Medicare, you don’t need to do anything when you turn 65. But you’ll need to sign up for Medicare promptly once you stop working or your employer coverage ends.

If your company employs fewer than 20 people

The rules are different if you work for a small company. If you’re employed at a company with fewer than 20 workers, your job may require you to sign up for Medicare when you’re first eligible at age 65. In this situation, Medicare becomes your primary payer when you seek medical care, and your employer plan acts as the secondary payer.

If your employer doesn’t offer health insurance at all, you’ll need to sign up for Medicare during your initial enrollment period.

6 Medicare mistakes to avoid if you’re working past age 65

If you’ve decided to work past 65 years old, you’ll need to make important decisions about your health care while being mindful of enrollment deadlines, late penalties and coverage gaps.

Here’s how to avoid easy mistakes while navigating your new health insurance options.

1. Not taking the time to compare your current group plan with Medicare

Before you delay Medicare enrollment, make sure you carefully review your current employer coverage and understand the basics of Medicare. Medicare might prove to be better, and potentially cheaper, health insurance for you.

There are two ways to receive Medicare coverage:

1. Original Medicare: This includes Part A (hospital coverage), Part B (doctor visits and other medical services) and Part D (prescription drug coverage). Some people also purchase a supplemental insurance policy, referred to as Medigap, to cover out-of-pocket costs like deductibles and copayments. Original Medicare is administered by the federal government.
2.  Medicare Advantage: Administered by private insurance companies, these plans act as an alternative to Original Medicare. They bundle Part A and Part B coverage together, and most of the time, Part D coverage, too.

Part A is premium-free (no monthly cost) for over 90 percent of beneficiaries because it’s primarily funded through payroll taxes. As long as you worked and paid into the system for at least 10 years, you qualify for premium-free Part A.

Part B, however, does come with a monthly premium of $174.70 in 2024. Part D plans also charge a monthly premium, which averaged $56.49 in 2023. Medicare Advantage plans may charge their own premium in addition to the standard Part B premium.

Here are some factors to consider when comparing Medicare with your employer’s health coverage:

• Compare the deductibles as well as the premiums. If you struggle to meet the yearly deductible at work and pay out-of-pocket for many of your health care costs, you might save money by enrolling in Medicare, even if the monthly premium is higher.
• Consider potential out-of-pocket maximums as well.
• If your employer offers a comprehensive health plan at a low cost, delaying Medicare enrollment might make sense. However, if you’re eligible for premium-free Part A, you should consider signing up for it when you’re first eligible. There’s no monthly cost for the coverage.
• If you’re enrolled in an affordable vision and dental plan at work, it might make sense to have both Medicare and insurance from your employer. Original Medicare doesn’t cover dental or routine eye exams, so additional benefits through your job can help fill in coverage gaps.
• If you plan to retire soon, enrolling in Medicare can ensure a smooth transition in your health coverage. Alternatively, if you plan to work for many years with the same employer, sticking with your workplace plan might make more sense.

Remember, there’s no one-size-fits-all answer. You can consult with your company’s human resources (HR) department or a trained nonprofit Medicare counselor (see the next step to learn more).

2. Not knowing where to go for help

If you’re navigating the complexities of Medicare while working, you’re bound to have questions. While an HR department can be a great resource, not every company has a great one. Even the best HR specialists likely won’t be able to explain your Medicare coverage options in detail or show you how to compare Part D or Medicare Advantage plans if you decide to enroll.

Meanwhile, so-called “Medicare experts” and specialists are often brokers or agents affiliated with private insurance companies that sell Medicare Advantage, Part D and/or Medigap supplement plans. They might provide helpful information, but their advice can be influenced by the people who pay them.

One of the best places to get truly unbiased, personalized information about Medicare is the State Health Insurance Assistance Programs, or SHIP. It’s a national program funded by the federal government and implemented at the state level. Medicare.gov specifically encourages beneficiaries to reach out to their local SHIP for questions about how Medicare works with other insurance.

SHIP offers free Medicare benefits counseling by trained volunteers to anyone eligible for Medicare, their families and their caregivers.

Counselors don’t work for any insurance company. They can show you how to compare your current employer coverage with Original Medicare or Medicare Advantage plans by using the Plan Finder tool. They can also answer questions about special enrollment periods, late enrollment fees and other unique circumstances, like how Medicare impacts your Medicaid or TRICARE benefits.

You can find the phone number and contact information for the SHIP program in your state by using this SHIP locator tool.

3. Contributing to a HSA

If you decide to enroll in Medicare while you’re still working, you won’t be able to contribute to a health savings account (HSA). Medicare is clear on this: You can’t contribute to an HSA after Medicare Part A or Part B coverage begins.

If you continue funding an HSA after enrolling in Medicare, you could be charged a 6 percent IRS tax penalty on those funds until you take the money out of the HSA.

However, so long as you’re working, you can keep contributing to a flexible spending account (FSA) without penalty.

Keep in mind that you’re only penalized for adding new money to an HSA. You can still withdraw funds from an existing HSA at any time. In fact, you can use that money to pay Medicare deductibles, premiums, copayments and other out-of-pocket medical costs.

Many people sign up for Medicare Part A at 65 if it’s premium-free. But if you want to contribute to an HSA, you’ll need to delay Part A enrollment.

4. Assuming your spouse can join Medicare when you do

Spouses can’t enroll in Medicare simply because their partner turns 65 years old. They need to qualify for coverage on their own — either by turning 65 themselves or by collecting Social Security Disability Benefits for at least two years — regardless of your own eligibility.

If your spouse, children or other dependents also receive health care coverage through your employer, it’s important to consider their health insurance options if you drop your workplace plan and enroll in Medicare at 65.

You might also run into issues if Medicare becomes your primary health insurance and your workplace plan acts as the secondary payer (as it does at small companies).

Once again, consult your HR department if you have questions about how enrolling in Medicare will impact other people in your family who receive health insurance through your job.

5. Missing your special enrollment period after you retire

After you leave your job or your workplace coverage ends, you’ll have a limited time to sign up for Medicare or else risk lifetime penalties.

You’ll qualify for what’s known as a special enrollment period (SEP) after you leave your job. This eight-month window begins the month after your employer’s health coverage ends. You’ll have 63 days after your prescription drug coverage ends to sign up for a Part D plan.

If you never signed up for Medicare, you can fill out your application online with the Social Security Administration.

If you enrolled in Part A while you were working, but now need to enroll in Part B:

• Go to Apply Online for Medicare Part B During a Special Enrollment Period and complete forms CMS-40B and CMS-L564.
• Upload evidence of your workplace group health care plan coverage.
• When filling out CMS-L564, state, “I want Part B coverage to begin (MM/YY)” in the remarks section of the CMS-40B form or online application.

You can enroll in Part D or Medicare Advantage plans through the Medicare Plan Finder tool, or by contacting the insurance company directly.

After you enroll in Medicare during your SEP, your coverage typically starts on the first of the following month.

If you miss your special enrollment period, you can sign up during the next general enrollment period, which takes place each year from Jan. 1 to March 31.

You don’t have to wait until you leave your job to sign up for Medicare, though. You can enroll in Medicare at any time while you or your spouse are covered by an employer group plan. In fact, Medicare recommends signing up at least a month before your workplace benefits end to avoid coverage gaps.

6. Not understanding Part B and Part D late enrollment penalties

Missing your special enrollment period can lead to stiff lifetime penalties. The longer you wait, the more you’ll have to pay for your Medicare coverage — and those added fees never go away.

There are two late enrollment penalties to be aware of:

• Part B: If you miss your eight-month SEP, you could face a 10 percent increase to your Part B premium for each 12-month period you could have enrolled but didn’t.
• Part D: If you go without creditable drug coverage for more than 63 days, you could face a penalty based on the number of months you delayed enrollment.

Let’s say you left your job and retired in July 2022, but didn’t sign up for Part B until July 2024. That’s two full years, so you’ll pay a 20 percent penalty each month for as long as you have Medicare (likely the rest of your life). In 2024, the Part B monthly premium is $174.70, so you’d pay an extra $34.94 per month (20 percent of $174.70) as a penalty, in addition to your $174.70 premium.

And remember, the standard Part B premium usually goes up slightly each year. So you’ll pay at least an extra $34.94 per month for as long as you have Part B.

Figuring out the Part D late enrollment penalty is a little more complicated than the Part B penalty. It’s calculated by multiplying 1 percent of the “national base beneficiary premium” ($34.70 In 2024) by the number of full months you went without Part D or creditable coverage. Medicare goes into more detail about the penalty on its website.

These penalties are easy enough to avoid. Be mindful of your special enrollment period when you leave your job, and don’t delay Medicare enrollment once your employer coverage ends.

Bottom line

People are working longer. Some do so out of necessity while others may keep working to maximize their Social Security benefit. Whatever your reason, don’t ignore Medicare when you turn 65 years old. It could cost you money and cause headaches down the road. By carefully comparing your options, understanding Medicare’s coordination with employer plans and avoiding common mistakes, you can pick the best option for your health and finances.