Medicare penalizes people who don’t enroll when they become eligible

Throughout Robert Joseph’s career, the Alvin, Tex., electrician always understood his health insurance policies. “I’ve never had a problem,” Joseph says, “until I tried to sign up for Medicare.”

The chief reason: Joseph didn’t sign up when he turned 65. He was still working, receiving health insurance from his employer. And when his company went bankrupt at the end of 2009 — Joseph was then 67 — he received 18 months of severance pay.

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“On my last day of work, I went to the Social Security office, asking for some guidance,” recalls Joseph. He never spoke to an expert; instead, he says, he was handed a couple of forms to complete. He researched his Medicare handbook, which noted that “current” employees didn’t need to apply for Medicare. Since he continued to get monthly severance checks that deducted Medicare taxes and he was allowed to continue buying health insurance through the same carrier for the 18 months, he thought he could wait to join Medicare. He was wrong.

Medicare no longer considered him a “current” employee and said he should have enrolled within eight months of his layoff, not 18 months later. As a result, for the rest of his life, Joseph may have to pay extra on his monthly Medicare premium (10 percent for each year he delayed enrollment after his job ended). Even worse, Joseph will be without any insurance for a year. Under Medicare rules, he has to wait until the next open enrollment period, beginning in January, to sign up, and coverage won’t begin until July.

Joseph is not alone. “We’re seeing various people who delayed enrollment into Medicare for various reasons,” says Frederic Riccardi, director of programs and outreach at the Medicare Rights Center, a nonprofit group that helps people with Medicare disputes.

Part of the problem is due to the absence of what most Americans used to see as a simple dividing line: On or about their 65th birthdays, they were expected to stop working, become eligible for full Social Security benefits and sign up for Medicare. Now that a growing number of people work past 65, and the age threshold for collecting full Social Security benefits is 66 and climbing, the transition period is less clear.

To avoid mistakes, here are five tips to help you navigate Medicare.

1. You must sign up for Medicare when you turn 65.

The only exceptions are for people already receiving Social Security benefits — in which case you’ll be automatically enrolled — or are employed (or whose spouse is) and getting health insurance through work.

“We will not be knocking on people’s doors to come in to file,” says Steve Richardson, deputy regional communications director for the Social Security’s office in Boston.

You can start signing up — online, via a toll-free telephone number or in person at a local Social Security office (make an appointment first) — three months before your 65th birthday. You have an additional three months after your birthday month to apply before penalties kick in.

If you hold off because you (or your spouse) are employed and covered by a company plan, you have eight months to enroll after the employment ceases.