Why some seniors wait to opt into Medicare until after they turn 65

While most seniors are eager to enroll in Medicare at sixty-five, some wonder if it is the right choice for them. The question of whether or not Medicare enrollment at sixty-five is mandatory depends on various factors.

Who is required to enroll in Medicare at 65?

Regardless of the answer to the questions above, someone who is eligible to receive Social Security benefits will be automatically enrolled in Medicare Part A. To opt-out, one must contact with Social Security Administration. From the time a person turns sixty-five and becomes eligible for Medicare, a grace period of eleven months is allowed before the penalties are applied.

Part A and B

Part A covers most hospital-related services like inpatient care in a hospital, skilled nursing facility care, hospice care, and home health care. You cannot receive Social Security benefits if you are not enrolled in Part A. So, for those sixty-five and older who are continuing to work at an organization with more than twenty employees, enrollment in Part A can be delayed until retirement.

Employment at a small business or organization

However, if your employer provides health insurance to less than twenty people, those over sixty-five are required to enroll in Medicare Part A and B. In 2025, most seniors enrolled in Part B will pay a monthly premium of $$185.00, which wil be deducted from their Social Security benefits automatically.

Since most people do not pay a premium for Part A, there are fewer penalties for opting out if a valid reason can be provided. Additionally, the federal government encourages many to enroll in Medicare Part A even if they receive coverage through their employer because most Social Security beneficiaries pay no premium for Part A.

However, some workers will have their health insurance covered until they retire and thus stick with their employer option or that which is provided as a retirement benefit.

Health Savings Accounts

Once you enroll in Medicare you can no longer contribute to a Health Savings Account (HSA).

The funds deposited into an HSA do not expire, and many workers contribute to these accounts and rely on them in retirement to cover the costs of a Medicare Advantage Plan or a Part D prescription drug plan.

At sixty-five, seniors can take advantage of tax-free benefits when withdrawing from funds from an HSA. However, funds deposited in an HSA cannot be used to purchase a Medigap coverage plan.

A factsheet on the utility of HSAs for seniors provided by Wellsely University highlights that "Using HSA money is an especially good method to pay for Medicare as it is challenging to pay for Medicare with pre-tax dollars." Since Medicare premiums are automatically deducted for Social Security checks, an HSA can be a helpful way to "reimburse yourself directly."

Penalities for opting out of Part B

Should one choose to forgo or opt-out of Part B, substantial fees, and penalties can be applied. For each year that one does not enroll in the required parts of Medicare, they can see a fee worth ten percent of the Medicare Part B premium deducted from their Social Security checks.

Making the decision to opt-out

Considering the information and requirements, it is important for seniors to evaluate whether the costs are worthy expenses. As more seniors are required to wait until sixty-seven to retire to receive the maximum Social Security benefit, more individuals may have to weigh the pros and cons of opting out.