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As more and more people are working past age 65, this question is becoming more common. Employees who are eligible for their group health plan may find that the group coverage is better, either because their doctor accepts the employer plan but won’t take Medicare or because they have a lot of prescriptions and don’t want to face the Part D coverage gap or because the combined premium and out-of-pocket exposure is lower with the group plan than with Medicare.

Whatever the reason, here’s the general rule on postponing Medicare:

Medicare Part A

  • At age 65, most people are eligible for premium-free Part A. If you’ve contributed to the Medicare program for 40 quarters (the equivalent of 10 years) or more, or if you’re married to someone who has, you shouldn’t have to pay for Part A once you become eligible.
  • If you’re not eligible for premium-free Part A, there is a penalty if you don’t sign up when you’re first eligible. The penalty is 10% per year times twice the number of years that you postponed it.
  • If you’re eligible for premium-free Part A and are not yet receiving Social Security, you can postpone Part A while you’re still working and sign up when you retire or drop the group health insurance. Some people choose to do this so they can continue to contribute to a Health Savings Account.
  • If you’re already receiving Social Security, though, you cannot postpone Part A because it will interfere with your Social Security checks. There’s a weird rule that says Medicare Part A is mandatory for anyone over age 65 who’s already receiving Social Security.

Medicare Part B

  • Medicare Part B has a monthly premium, so a lot of people who are still working would like to postpone Part B while they’re enrolled in the plan offered by their employer. Others choose to postpone Part B so they can continue to contribute to a Health Savings Account.
  • As long as you have group coverage because of current employment (retiree coverage and COBRA are not current employment), you should be able to postpone Part B and then sign up during a special enrollment period at a later time, either while you’re still covered by the group plan, when you drop the group health coverage, or when you retire.
  • If Medicare is primary, as it usually is when the company has fewer then 20 employees, you may want to think twice before postponing Part B. Insurance companies can pay as if you had Part B when Medicare is primary, whether you actually have Part B or not. This can cause you to pay some big out-of-pocket expenses when you thought you were well-protected.
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