Why Should I Enroll in Medicare?

Medicare provides valuable health insurance coverage that can help you pay for costly medical emergencies as well as routine wellness services. A federal health insurance program for people aged 65 and older or for younger people with certain disabilities, Medicare is a popular program; according to a March 2022 report by the Centers for Medicare and Medicaid Services, 63.8 million people are enrolled in Medicare Parts A and/or B. In addition, many people are eligible for premium-free Medicare Part A, which covers hospital services. Learn more about how signing up for Medicare at 65 may be a good idea for your long-term health coverage needs.

Is Medicare Mandatory?

Signing up for Medicare at 65 is not mandatory, though those who get Social Security retirement benefits are automatically enrolled in Medicare Part A and Part B when they become eligible at 65. Some beneficiaries may choose to delay their Part B enrollment, but you cannot opt out of Part A coverage without also opting out of Social Security benefits altogether.

However, though Medicare is not mandatory, those who delay enrollment after they first become eligible may face late enrollment penalties should they choose to enroll later. For example, those who postpone Part B enrollment can receive a permanent 10% premium increase for every 12-month period they put off signing up. But if you delay enrollment because you have other active health coverage in place already, such as if you still have employer-sponsored group health coverage, you may be able to waive the late enrollment fee.

Do You Need Medicare If You’re Working?

Whether you need Medicare if you’re still working depends on your current coverage and needs. Consider your coverage needs and your costs for job-based health insurance when determining whether you should wait until retirement to enroll in Medicare. 

Employer-sponsored group health plans tend to offer more benefits than Original Medicare, such as prescription, dental, and vision coverage. Because employers subsidize premium costs for these types of plans, it could also be less expensive than Medicare. Delaying Medicare enrollment could make sense for those whose job-based plans offer more coverage at a lower cost than Medicare.

Employer-sponsored plans are restricted to the insurer and policies chosen by the employer, as well as the plan’s network of providers for optimal service coverage. Medicare, on the other hand, is accepted by whatever providers take Medicare. Dropping employer-sponsored coverage for Medicare could make sense for people who are not satisfied with their current plan’s coverage levels, out-of-pocket costs, or healthcare provider options. 

Another option is to have both employer-sponsored coverage and Medicare at the same time. When you have Medicare and a group health plan, your employer-based insurance would act as the primary insurer and pay first. Medicare would then act as the secondary insurance and help cover what your group plan did not.

The Importance of Medicare

When Medicare was established in 1965 to address the rising costs of healthcare for the aging population, about only half of older adults were insured; many retirees’ savings were threatened by high health costs. By 2019, only 1% of people 65 and older were uninsured because of Medicare.

Medical emergencies can deplete your retirement funds

Common medical emergencies faced by older adults can come with surprisingly high price tags. Medicare coverage can help older adults avoid dipping into their hard-earned retirement savings to pay for medical bills. 

Without insurance, a single three-day hospital stay could cost around $30,000, while treating a broken leg could cost $7,500. The cash price for major joint replacement (hip or knee) surgery averaged more than $29,000 in 2021, while heart valve surgery cost uninsured people an average of nearly $128,000.

Cancer treatment could take an even larger bite out of an uninsured older adult’s retirement savings. Individual costs may vary, but a 2018 estimate pegged the average cost of treatment at $150,000.

Regular preventative care can decrease your risk of medical emergencies

Preventative care can help older adults stay healthy or catch health problems at an earlier stage when treatment costs may be more affordable. Medicare coverage can help you pay for a variety of preventive services, including cancer screenings, routine immunizations, and health coaching sessions. For example, Medicare Part B offers a “Welcome to Medicare” physician visit for new members. During this visit, your doctor may review your health history, check your vital signs, and offer personalized health recommendations.

Costs for screening tests could also be a barrier for some older adults. Without insurance, the average cash price for the routine mammograms used to detect breast cancer was $233 in 2021. Medicare Part B covers this screening, and cancer treatment costs may be lower for people diagnosed at earlier stages.

Medicare offers standardized and regulated access to healthcare

As a federal health insurance program, Medicare is standardized and regulated. Original Medicare offers standard costs and coverage nationwide, making it easier for beneficiaries to get care if they move to another state, travel across the country, or even just want to change local healthcare providers.

Medicare Advantage plans are sold by Medicare-approved private companies, and are required to follow rules set by Medicare, such as offering coverage for Part A and Part B services at minimum. These regulations offer predictability in coverage for members. 

Supplemental private policies for Original Medicare are also regulated. Medicare drug plans, also known as Part D, are required to cover a range of drugs set by Medicare. Medicare Supplement Insurance, also known as Medigap, are standardized to protect consumers, and some states may have their own regulations for these plans to serve residents.

The Cost of Medicare

The cost of Medicare coverage may vary depending on several factors, including the coverage options you select and the health services you need. To understand how much you might pay for your coverage, consider the plan’s premiums, deductible, coinsurance, and copayments.

Medicare Premiums

Premiums are the amount you pay each month to keep your Medicare coverage active. Each part of Medicare has its own premium, so costs may vary depending on your coverage choices. 

People with Original Medicare typically don’t pay a premium for Part A. However, some people may pay either $275 or $499 per month, depending on how long they or their spouse paid Medicare taxes while working. The standard Part B premium in 2022 is $170.10. 

Those enrolled in a Medicare Advantage plan would have a different premium based on the insurer and plan chosen, but would not pay premiums for Part A or Part B, as Medicare Advantage plans replace Original Medicare entirely. However, Part D and Medigap plans would have their own separate premiums in addition to Original Medicare.

Medicare Deductibles

Medicare deductibles are the amounts you pay out of pocket for covered services before Medicare kicks in. Some services may be covered without a deductible, including home health care and preventive care.

Medicare Part A and Part B have separate deductibles. In 2022, the Part A hospital inpatient deductible is $1,556 per benefit period, and the annual deductible for Part B services is $233. In Medicare Advantage, deductibles may vary depending on the plan.

Medicare Coinsurance

Coinsurance is your share of the cost of Medicare-covered services after you’ve met your deductible. For example, in Original Medicare, the coinsurance for a hospital stay is $0 per day for days 1 through 60, and $389 per day for days 61 through 90. You would pay those amounts out of pocket and Medicare would cover the remainder of the bill. 

The coinsurance for Part B services is generally 20%, which means you would pay for 20% of the covered service and Medicare would pay the remaining 80%.

Medicare Copays

Copayments, otherwise known as copays, are a cost-sharing requirement in some Medicare Advantage or Medicare Part D drug plans. They’re a nominal flat fee you pay upfront when you receive certain health services. For example, a Medicare Advantage plan may charge a $20 copay for an urgent care visit, and a Part D plan may charge a $5 copay to fill a generic drug prescription or $20 for a brand-name drug prescription.

Common Medicare Options

Medicare-eligible people may choose between Original Medicare (Part A and Part B) or Medicare Advantage (Part C). Medicare Part D and Medicare Supplement Insurance are optional coverages for those enrolled in Original Medicare. 

Medicare Part A

• Who it is best for: Anyone who is eligible for premium-free Part A
• Late enrollment penalty: 10% premium increase for twice the number of years you delayed Part A. For example, if you delayed enrollment for 4 years, you would pay the increased premium for 8 years.
• How to enroll late if you delayed: Sign up during the General Enrollment Period (January 1 to March 31 each year) or during your Special Enrollment Period window if eligible

Medicare Part A covers inpatient hospital stays, short-term nursing home care, hospice care, and home health care. Many Medicare-eligible people receive Part A coverage without needing to pay a monthly premium.

The Part A late enrollment penalty does not apply to people who are eligible for premium-free Part A, but it could still make sense to sign up when you are first eligible, even if you have employer-sponsored health insurance. These two types of insurance can work together to cover your health care needs, which may result in lower out-of-pocket costs.

Those who are not eligible for premium-free Part A may choose to buy it. Generally, those who opt to purchase Part A are also required to enroll in Part B and pay monthly premiums for both programs. However, those who choose not to buy Part A can still buy Part B.

Medicare Part B

• Who it is best for: Eligible adults who no longer have employer-sponsored health insurance
• Late enrollment penalty: Lifetime 10% premium increase for each 12-month period without Part B coverage
• How to enroll late if you delayed: Sign up during the General Enrollment Period (January 1 to March 31 each year) or during your Special Enrollment Period window if eligible

Medicare Part B covers outpatient services that are needed to prevent, diagnose, or treat medical conditions. This includes things like doctor visits and ambulance services.

People who are still working and have employer-sponsored health insurance may be able to delay Part B enrollment without penalty. You might choose to delay enrollment if your job-based health plan offers lower out-of-pocket costs or broader coverage than Medicare Part B. 

Another option is to have both job-based coverage and Part B at the same time. If you have both, Medicare may help cover costs that your employer-sponsored plan doesn’t cover.

Medicare Advantage, or Part C

• Who it is best for: Eligible adults who no longer have employer-sponsored health insurance
• Late enrollment penalty: Part A and/or Part B late penalties may apply
• How to enroll late if you delayed: Join a Medicare Advantage plan during the next Annual Enrollment Period (October 15 to December 7 each year) if you are already enrolled in Original Medicare or during your Special Enrollment Period window if eligible

Medicare Advantage (Part C) is an option that provides Medicare coverage through approved private companies. Medicare Advantage plans are required to offer the same amount of coverage as Original Medicare (Part A and Part B), and many plans may provide additional benefits, such as Medicare drug coverage (Part D), dental care, eye exams, and hearing exams.

Out-of-pocket costs and rules for accessing services may be different than Original Medicare. Medicare Advantage plans generally have provider networks and require members to get care from physicians, specialists, and facilities that contract with the plan.  

Medicare Part D

• Who it is best for: Eligible adults who no longer have employer-sponsored health insurance or drug coverage through a Medicare Advantage plan
• Late enrollment penalty: Lifetime 1% penalty for each month without creditable drug coverage
• How to enroll late if you delayed: Sign up during the General Enrollment Period (January 1 to March 31 each year) or during your Special Enrollment Period window if eligible

Medicare drug plans (Part D) help cover the cost of outpatient prescription drugs. While Medicare requires plans to offer a standard level of coverage, out-of-pocket costs and exact covered medications may vary from one plan to another. 

It may make sense to get Part D when you become eligible, even if you don’t take any medications. Medical needs can change over time, and if you decide you want to sign up later, a permanent late enrollment penalty could apply. 

Medicare Supplement Insurance, or Medigap

• Who it is best for: Eligible adults who already have Original Medicare and want help paying for their costs in Original Medicare
• Late enrollment penalty: Potential for higher premiums or fewer plan options
• How to enroll late if you delayed: Contact Medigap insurers in your state

Medicare Supplement Insurance can help people with Original Medicare pay for copayments, coinsurance, and deductibles. These plans are standardized with the letters A, B, C, D, F, G, K, L, M, and N, except in Massachusetts, Minnesota, and Wisconsin, where plans are standardized in a different way. Costs and coverage may vary depending on the plan. 

A 6-month open enrollment period for Medigap begins when you enroll in Medicare Part B. Outside of this period, insurers may charge higher premiums or decline to sell you a Medigap policy altogether.

Enrolling in Medicare

Medicare is available to people who are 65 or older, people under 65 with certain disabilities, and people of any age with end-stage renal disease. For some eligible people, enrollment in Medicare is automatic. Others can sign up during their Initial Enrollment Period or later during a recurring enrollment period.

Automatic Enrollment in Medicare

People who receive retirement or disability benefits from the Railroad Retirement Board or Social Security Administration are automatically enrolled in Medicare when they become eligible. For example, a person who takes Social Security retirement at 62 could expect to receive their Medicare card in the mail 3 months before their 65th birthday.

Initial Enrollment in Medicare

Eligible people who aren’t automatically enrolled in Medicare can sign up during their Initial Enrollment Period (IEP). For people eligible due to age, this 7-month window starts 3 months before the month they turn 65. For example, if you’re turning 65 in August, your IEP would run from May 1 to November 30.

Set Enrollment Periods for Medicare

Medicare offers recurring enrollment periods at set times throughout the year, though there are limits to what changes can be made during each period. Some periods can be used to sign up for Medicare, while others provide an opportunity to change your existing coverage:

• Open Enrollment Period: The Medicare Advantage Open Enrollment Period runs from January 1 to March 31 each year. During this enrollment period, people who already have Medicare Advantage can enroll in a different Medicare Advantage plan or return to Original Medicare.
• General Enrollment Period: Medicare’s General Enrollment Period takes place from January 1 to March 31. People who did not get Part A and/or Part B during their Initial Enrollment Period can sign up at this time, though late enrollment penalties may apply. 
• Annual Enrollment Period: Between October 15 and December 7 each year, those who already have Medicare can make a variety of changes. Permitted changes include switching between Medicare Advantage and Original Medicare, or joining, switching, or dropping a Part D drug plan. 
• Special Enrollment Periods: People who work past 65 and have job-based health coverage may be eligible for a Special Enrollment Period. An 8-month SEP begins the month the job-based coverage ends or when the covered employee leaves their job, whichever happens first.