31 Aug What happens if we don’t take Medicare Part B?

Q. My husband turns 65 this month. We have chosen not to participate in Medicare Part B. We have full coverage insurance through his retirement program from the federal government. We are curious as to whether or not this was the right decision. I am not yet 65 so we have to keep this coverage until I receive Medicare. What are the consequences if we don’t take Part B?
— Confused

A. We’re glad you asked.

It’s very important to understand the consequences of not taking Part B, which you do not have to take.

The first thing that you need to find out is if Medicare is primary on your husband’s retirement plan, said Jeanne Kane, a certified financial planner with JFL Total Wealth Management in Boonton.

If it is, he must sign up for Medicare Part B to avoid coverage gaps, she said.

“In almost all circumstances, if you are Medicare eligible and participating in a retirement program, then Medicare becomes primary to the retirement plan,” she said. “This means Medicare is responsible for its portion before the retirement plan contributes towards any medical bills.”

For example, she said, Medicare covers the first 80% of Medicare-approved medical expenses, such as doctors, other providers, tests, durable medical equipment, and more, so you have significant exposure, she said.

So if you don’t have Medicare Part B and have a $10,000 medical event, you would be responsible for $8,000 before his retirement program kicked in, she said.

She said that’s a big risk to take given the cost of healthcare today.

Always make sure to get clarification on your specific situation from your plan administrator. For example, certain federal retirees who receive their health insurance from a plan in the Federal Employee Health Benefits Program aren’t required to enroll in Part B but may still benefit, she said.

Part B may also cover services that your husband’s retirement program does not, so he can still change his mind.

There are three enrollment periods.

First, there’s the initial sign-up time, which he falls into because he turns 65 this month, Kane said.

“There is an initial seven-month enrollment period when you turn 65,” Kane said. “You can sign up three months prior to your 65th birthday, the month of your 65th birthday and the three months after your 65th birthday.”

So if your husband’s birthday is in August, he has until November to enroll in the initial enrollment period.

Then there is the general enrollment period.

If your husband decides to sign up after initial enrollment, he can enroll during the general enrollment period which is Jan. 1 through March 31. Coverage won’t begin until July 1, Kane said.

Then there is a penalty-free special enrollment period if he left his job within the past eight months, she said.

“For every 12 months that you delay enrolling in Medicare Part B, you will have to pay a 10% penalty,” she said. “For instance, if your husband waits until 2027 to sign up for Medicare Part B, your premium will be 50% higher (5 years x 10%). The longer you wait, the higher the penalty.”

Then you will be paying a higher premium for the rest of your life.

“While you’re not required to take Part B, delaying it will almost always result in financial exposure as well as higher future Part B premiums when you do enroll,” Kane said. “Medicare can be complicated. Before making a decision that can have a potentially large and lasting financial impact, your husband should speak with his retirement program as well as Medicare.”

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This story was originally published on Aug. 31, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.