If you are turning 65 soon you might be looking for information on your Medicare eligibility, and what exactly having Medicare means. Medicare provides insurance to seniors under plans known as Parts A and B. Part A is hospital insurance, and Part B is medical insurance. While Part A is free, Part B is only covered up to 80% by Medicare, leaving you to pay for the other 20%. Unfortunately, some people are unaware that they must sign up for Part B within a certain timeframe, and can face a Medicare penalty.
Currently Medicare does not notify you when it is time to sign up and it is up to you to be aware of the standard enrollment periods. If you do not sign up for Medicare Part B within the specified enrollment period, then you will face a life-long penalty. Luckily, in order to help people avoid this penalty, Congress is considering making revisions to a bill called the BENES Act.
The Medicare Penalty
Medicare Part A normally kicks in when you turn 65 on its own, there is no action required from you. You can enroll in Part B three months before you turn 65, the month you turn 65, and three months after the month you turn 65. While it is mandatory to enroll into Medicare Part A when you turn 65, you do have the option to opt out and put off your enrollment into Part B. Generally this will cause a penalty to be applied to your future Medicare rates unless you qualify for a special enrollment period.
The qualifications for a special enrollment period are:
- You have coverage by a group health plan through you or your spouse’s current employment.
- During the 8 months following the month your group health plan coverage ends, or when the employment ends (whichever is first).
If you do not qualify for a special enrollment period, then you will only be able to join during The General Enrollment Period, or GEP.
The GEP, which falls between January 1 and March 31 of every year, is the period of time when you can enroll in Medicare Part B for the first time. Coverage will then begin the following July. However, if you skipped the initial enrollment period when you turned 65 and waited for a GEP, you will be at risk of facing a penalty.
When you do decide to finally sign up for Medicare Part B, you will then have to pay an additional 10% on top of your monthly premiums. For every full 12-month period (calendar year) that you were eligible for Part B, but did not enroll in it, you will pay a 10% penalty for as long as you have Part B. For example, if you opt out of signing up for Part B benefits for two years, then you will face a 20% penalty fee added onto your monthly Part B premiums forever.
Unfortunately, some seniors mistakenly assume they can skip Part B because they have a former employer’s insurance through the ACA, or for other reasons. This leads to the beneficiaries facing a monthly Part B penalty for the rest of their lives. According to research, in 2018, about 760,000 people were paying a late penalty onto their monthly Part B premium, increasing their costs an average of nearly 30%. Congress thankfully is stepping in to try and end the Medicare penalty by notifying the beneficiaries before they turn 65.
Congress hopes to revise the Beneficiary Enrollment Notification and Eligibility Simplification (BENES) Act, so that Medicare & Medicaid Services are required to notify people before their 65th birthday about their Medicare eligibility. Currently, the government only contacts people who are receiving Social Security benefits to notify them when it is time to sign up for Medicare.
The hope is that this would lead to beneficiaries avoiding the Part B penalty when they do not sign up for 12 or more months after they become eligible.
If passed, the revision would be the first one in five decades. This would move the GEP (January through March) window to the fall, which would coincide with the enrollment period for drug coverage and Medicare Advantage. It would also do away with the July effective date, and move it to January.