Medicare enrollment can be confusing, and it can come with some potentially significant financial consequences if you don’t get it right.
A bill making its way through Congress aims to help beneficiaries avoid costly late enrollment penalties, coverage gaps and general confusion around Medicare enrollment.
The Beneficiary Enrollment Notification and Eligibility Simplification (BENES) Act cleared a House committee on July 15, setting up a vote by the full chamber.
Medicare enrollment confusion and late enrollment fees
Most people become eligible for Medicare at age 65. If they already collect Social Security by that age, they will typically be automatically enrolled in Medicare Part A and Part B. Medicare Part A (hospital insurance) and Part B (medical insurance) are known together as “Original Medicare” and are provided by the federal government.
Seniors who choose to delay Social Security retirement benefits past age 65, however, are not automatically enrolled in Medicare when they turn 65. These beneficiaries must go through a manual process to sign up for Medicare, and many may not be aware they need to do so.
As a result, many eligible beneficiaries can face hefty late enrollment fees once they finally do enroll in Medicare, if they enroll outside of a federally-protected Late Enrollment Period.
- The Part B late enrollment fee is an additional 10% of a beneficiary’s Part B monthly premium for each 12-month period that they were eligible to sign up for coverage but failed to do so. The penalty fee is added to a beneficiary’s monthly premium each month for as long as they remain enrolled in Part B.
For example, if someone delays enrolling in Medicare Part B until 27 months after they became eligible, they’ll pay a Part B late enrollment fee of an additional 20% on top of their monthly Part B premium. They’ll have to pay this penalty for the rest of their life that they remain enrolled in Part B.
- The Medicare Part A late enrollment penalty is an additional 10% charge on top of a beneficiary’s Part A monthly premium. This higher premium amount is charged for twice the number of years a beneficiary was eligible but didn’t sign up.
In the above example of a Medicare beneficiary who was eligible for Part A but didn’t sign up for 2 years, they’ll pay the monthly Part A late enrollment penalty for 4 years.
- Medicare Part D prescription drug coverage also has a late enrollment penalty.
If someone goes without creditable drug coverage (employer, union or other drug coverage that is at least as extensive as standard Medicare prescription coverage) for 63 straight days or longer after first becoming eligible for Medicare, they’ll typically face the Part D late enrollment penalty.
The government calculates the Part D late enrollment fee using somewhat complex math. The fees, however, can quickly add up for beneficiaries.
The issues of late Medicare enrollment and resulting fees grow larger every year. In 2002, 92% of 65-year-olds collected Social Security (SSA) benefits. In 2016, that number had shrunk to just 60%.
Part of the reason for this growing delay is that the age to qualify for full benefits has increased, with who turn 65 in 2020 needing to wait until they are 66 to collect their full SSA retirement benefits.
Another reason is that an increasing number of older adults are remaining in the workforce and delaying their retirement.
Add up these factors, and you have more senior adults who are not collecting Social Security and thus not being automatically enrolled in Medicare.
How the BENES Act could help Medicare beneficiaries and seniors
The BENES Act would implement a number of procedures to help better protect seniors and Medicare beneficiaries:
- Two separate notices would be sent to individuals who are nearing Medicare eligibility age. The first notice would be sent six months before their enrollment window begins, and the second would be sent one month prior to their enrollment opportunity.
- Coverage gaps due to missed or deferred enrollments would be eliminated. People who miss their initial Part B signup period currently must sometimes wait until the following calendar year for a second chance at enrollment. The BENES Act would eliminate that coverage gap and allow for immediate Part B enrollment.
- The enrollment periods for Original Medicare would be aligned with those of Medicare Advantage (Part C) and Medicare Part D plans to cut down on confusion about which part of Medicare you may enroll in at what time of year.
- The circumstances that qualify someone for a Special Enrollment Period for Part A and Part B would be expanded.
“The intent was for all those health bills in the committee markup to be nonpartisan and noncontroversial,” said Lindsey Copeland, federal policy director for the advocacy group Medicare Rights Center in an article published by CNBC. “We hope the (BENES Act) makes it to the floor pretty easily.
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