Medicare’s little known penalty trap!

All, This morning I’ve sent the following email to my clients who are 64 or older, you should definitely read it! It’s about Medicare’s little known penalty trap! Don’t get snared…

To all my Medicare clients… good morning.

Many of my clients who have turned 65, and are still working, and who remain on their company’s health  plan, should know that there is little known trap that you must become aware of.  Even though you remain on your employers health plan, you must/should up for Medicare Part B anyway.  This is because when you turn 65 you have the ability to sign up for Part B Medicare but you are not required to do so.  However, if you don’t, there are potential penalties.

But before I go any further let me explain the difference in the parts of Medicare.  There are basically 2 parts, Part A and Part B.  If you’ve worked 40 quarters or the equivalent of 10-years over your lifetime, you are automatically enrolled into Part A.  Part A covers hospitalization & is free of charge.  You can also enroll into Part B but it is not required.  Part B covers doctor visits & non-hospital services.  There is a monthly charge for enrolling in Part B, and depending on where you live and some other factors, that charge will be between $99 and $104 every month here in California, I suspect cheaper elsewhere.  Often folks simply have it automatically taken out of their Social Security check each month.  Because of this charge, many people don’t sign up for part B.

However if you don’t enroll into Part B, and later you want your Part B benefits, (you’ve now left the company plan), you will be penalized for not enrolling into Part B when you were first eligible. The penalty is 1% for every month you were not enrolled.  So let’s say you do not enroll into Part B because doctor visits are covered under your employee coverage, and you figure, “Who needs Part b?” but 2 years later when you leave the company plan & now want/need Part B coverage, the penalty will be 1% for every month you were not enrolled!  In this case of 2 years, you will be charged 24% more each month for Part B coverage and that penalty is permanent!  That’s the little known Medicare Part B trap you may have already fallen into… if you have questions be sure to get in touch…  


Suppose that a person turns 65, and they or a spouse keeps working and maintains employer health coverage instead of retiring and enrolling in Social Security. They must sign up for Medicare, especially Part B, which covers physician and other outpatient care. Otherwise, they risk coverage gaps and expensive lifelong Part B late-enrollment penalties. People who delay Social Security retirement benefits until after 65 get no official government notice about how to avoid penalties or gaps in coverage.

This problem is likely to worsen as the full Social Security retirement age reaches 67 for those born in 1960 or later and more Americans work past 65. Since 2000, the proportion of Americans enrolling by age 65 has dropped by 20% to 61.5% in 2014. Avoiding penalties when people continue to work past age 65 depends largely on whether their employer coverage is primary or secondary to Medicare. That depends on whether coverage is based on employment and the number of people employed by employer. In some cases, an individual must enroll in Medicare during a special enrollment period or face lifelong Part B late-enrollment penalties and go up to 16 months without coverage.

Even with extensive online and print resources, many beneficiaries need personalized counseling to make informed choices. The SHIP state-run programs get federal grants train and manage a network of staff and volunteer Medicare counselors who provide free counseling to beneficiaries. Medicare beneficiaries are inundated with mail and ads about Medicare plans when they turn 65 and during the annual fall open enrollment period. Feeling overwhelmed and unsure of where to start, some beneficiaries seek out a SHIP or BROKER. Others may want a second opinion after doing their own research.

That broker would be me!

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