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Medicare: What to Do If You Work Past Age 65

By Dan Caplinger – Aug 22, 2015 at 8:03AM

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If you don't expect to retire at 65, you need to know whether signing up for Medicare makes sense, or whether you should wait.


Image: Medicare.gov.

Medicare provides healthcare benefits to tens of millions of Americans, and many people specifically wait to retire until they become eligible for the program at age 65. Yet a growing number of people have decided to keep working beyond 65 in order to keep earning a higher income and shore up their retirement finances.

For those 65 and older who still have coverage under an employer plan, it can be challenging to figure out the best course of action to take with Medicare. Let's take a closer look at this key issue that has become increasingly important as the population ages, and older workers make tough decisions about when and if they'll be able to retire.

Dealing with Medicare's alphabet soup
The first thing you need to consider is that Medicare has multiple coverage types, and you might want to handle them differently. For most people, Medicare Part A -- the portion that covers hospital and inpatient care expenses -- comes with no additional premium, and so there's little reason not to sign up for Part A, even if you have group health insurance.

Where things get trickier, though, is with Medicare coverage for doctor visits and outpatient care under Part B, and for prescription drug plans under Part D. The reason is that most people have to pay premiums to get coverage under those parts of Medicare. So the question is whether having Medicare coverage really adds anything to the group coverage you have with your current employer.

In order to figure that out, you need to read through your employer health-insurance policy closely. By comparing what it covers with what Medicare will help pay for, you'll get a better sense of whether having both sets of coverages would be worth the added premium cost. Because employer plans vary so much, it's impossible to give a good general rule to follow, and a lot also depends on your own individual healthcare needs, and the extent to which you take advantage of particular types of coverage under both your employer plan and what Medicare offers.

Dealing with your employer
In some cases, your employer will have something to say about whether you need to sign up for Medicare. That's because your employer has a financial incentive to try to get Medicare to take first responsibility for paying your healthcare expenses, as it can result in lower employer costs either in covering those expenses itself through self-insurance mechanisms, or in paying reduced premiums to insurance companies for your group coverage.

Federal law prevents employers with 20 or more workers from requiring their employees to sign up for Medicare at 65, forcing them, instead, to offer older workers the same health-insurance benefits as younger employees. However, for smaller employers, those laws don't apply, and so workers can require that you enroll in Medicare Part B at age 65 in order to retain comprehensive coverage.

Does it matter if you're collecting Social Security?
Many people mistakenly believe that they have to claim Medicare and Social Security at the same time, but there's no requirement to do so. Moreover, even if you work past age 65, you can still collect Social Security benefits if you qualify.

The thing to remember for Medicare purposes, though, is that if you get Social Security, you'll automatically get enrolled in Medicare Parts A and B right before you turn 65. In order not to have that automatic provision apply, you need to specifically opt out of Part B coverage if you have group insurance through your employer.

Don't worry about enrollment penalties
Finally, those who work past 65 generally don't have to deal with Medicare provisions that impose penalties for those who don't enroll at their first opportunity. For most people, for every year you don't sign up for Medicare Part B coverage after you're eligible, you have to pay 10% extra as a late enrollment penalty on your monthly premium for the rest of your life.

However, Medicare recognizes having group coverage through an employer as an exception to the penalty rule. When you do decide to retire, you'll have an opportunity to enroll in Medicare through a special enrollment period, and that's when the clock will start on any potential late-enrollment penalty.

Medicare is complicated enough even for those who don't have other types of healthcare coverage. For the most part, those who work beyond 65 can often rely on their existing coverages from their employers; but by knowing the situations in which it won't work out well, you can be prepared to do what you need to do in order to protect yourself from the high costs of healthcare.

Dan Caplinger has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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