As you turn 65, you must figure out Medicare — even if you plan to work beyond that

As the clock ticks down to your 65th birthday, you’ve got more to think about than a party with cake and a lot of candles. Your future healthcare depends on it.

Most Americans, even those who are still working and plan to continue enrollment in a company health insurance plan, should consider signing up for Medicare during a seven-month window that runs three months before their birthday month and three months afterward. If you’re celebrating your 65th on Nov. 15, for example, your initial enrollment window runs from Aug. 1 to Feb. 28, 2023.

“Three months before your 65th, take a look at your employer’s insurance and compare it with what you’ll be paying for traditional Medicare and a Medigap policy or a Medicare Advantage plan,” said Kathy Sarmiento, SHINE (Serving Health Insurance Needs of Elders) Medicare/Medicaid counseling program director at the Alliance for Aging. You’ll also need to factor in costs for Part D, which covers prescriptions and is included in many Medicare Advantage plans, vs. your company’s prescription coverage.

There’s not a one-size-fits-all solution for your Medicare decision. It depends on many factors, including your state of health, whether you have dependents who need coverage through your employer group plan, your finances and your lifestyle.

During the Medicare open enrollment period that runs Oct. 15 to Dec. 7, companies release their prices for various plans for the coming year so it’s a good time to comparison shop. People approaching their 65th birthday often find their mailboxes flooded with offers this time of year, said Sarmiento.

READ MORE: Deciding whether Medicare Advantage plans are right for you

If you miss that window around your birthday, it doesn’t mean you’ll never be able to enroll in Medicare. You can sign up during the Medicare general enrollment period, which runs from Jan.1 to March 31 each year. New in 2023, your coverage will start the month after you sign up, instead of July 1, which used to be the case, so there’s less chance of a coverage gap.

Signing up after leaving a job

But signing up late also means that your premiums for Medicare Part B, which covers doctor visits and outpatient services, most likely will cost you more.

If you plan to continue working past 65, however, and want to keep your company health plan or stay on your spouse’s group plan, in most cases, but not all, you can delay signing up for Medicare until you or your spouse stop working without a penalty.

You have an eight-month special enrollment window after you or your spouse leave the job. But be forewarned, even if you have COBRA coverage to extend your employer’s healthcare coverage after you stop working, this is not considered credible coverage in the eyes of Medicare, and you still must sign up within that eight-month window after the end of employment or face late penalties.

“As soon as you know you’re going to retire, sign up for Parts A & B of Medicare in order to avoid any gaps in coverage,” said Tricia Sandiego, senior adviser for AARP’s Caregiving and Health Team.

But if you’re zeroing in on that 65th birthday and plan to continue working, it’s important to remember that you have options.

You can keep your company health plan or stay on your spouse’s group plan. That’s up to you but only if you work for what Medicare considers a large company — one with at least 20 employees. Those employers must offer older employees the same healthcare benefits that they offer younger workers.

‘Credible coverage’

“You can keep your coverage if it is considered credible coverage — as good or better than Medicare,” said Sarmiento. Just make sure you keep your eye on that eight-month special enrollment window when you finally do retire to avoid any penalties.

However, you don’t have to continue enrollment in your employer plan or that of your spouse if you think you would get better coverage by enrolling in Medicare.

“It’s entirely your choice whether to accept the employer’s health plan and delay Medicare enrollment or to go solely with Medicare or have the employer coverage and Medicare at the same time,” said Sandiego.

But the rules could be different if you work for an employer with fewer than 20 workers.

In that case, an employer may choose to designate Medicare as your primary insurance when you turn 65 and the work plan as secondary, filling in any gaps in Medicare coverage. That means that the employer group plan would only pay for medical claims after Medicare pays its share, so failure to sign up for Medicare on a timely basis could mean you’ll be left without coverage.

With a smaller company it’s “the employer who decides how you interact with Medicare,” said Sandiego in an AARP webinar.

Check with HR before turning 65

Regardless of the size of your company, Medicare advisers say as you approach your 65th birthday, you should check with your company’s human resources staff and with your union benefits administrator if you’re a union member to make sure you understand your company’s policies on Medicare enrollment.

There are also different rules for state and federal employees, active members of the military and those eligible for railroad retirement benefits.

Some people choose to sign up for Medicare Part A, which covers hospital stays, as soon as they are eligible even if they’re still working. “It’s free [for those who have worked for 40 calendar quarters and paid into the Social Security system],” said Sarmiento. But she advises anyone who wants to retain their employer’s plan after age 65 to put off signing up for Part B until they leave the job.

The average Part B premium for a Medicare Advantage plan is $170.10 monthly. “I would sign up for Part A anyway just to have it done, but you don’t want to have to pay that $170,” said Sarmiento.

Weigh the costs

However, you’ve got to do the math.

While I was working at my last employer, for example, my co-pay for ongoing physical therapy was $70. Since I needed three sessions per week, that quickly added up. I later discovered that under a Medicare Advantage plan available in South Florida, my co-pay for the same physical therapy would have been either 0 or $10 per session.

Such a cost advantage might not work out for everyone, however.

Another potential problem in signing up for Medicare Part B while still working, Sarmiento said, is that an employee will lose the benefits from their work plan. “If you’re insuring dependents under insurance from your employer, what will those dependents do? They’ll have to go to healthcare.gov,” she said.

Pre-existing conditions

Another factor to be aware of if you’re considering traditional Medicare with a Medigap policy that will fill in coverage gaps is that unless you buy a Medigap policy within six months of enrolling in Medicare Part B, a Medigap insurer can reject you or charge you more if you have a preexisting condition.

If you’re 65 or older and sign up within the six-month window, a Medigap insurer cannot reject you for a preexisting condition such as diabetes.

As workers approach their milestone 65th birthdays, they also need to think about what type of Medicare coverage will work the best for them: traditional Medicare with a supplemental Medigap policy or a Medical Advantage HMO, which generally won’t allow out-of-network providers except in the case of emergencies, or a Medical Advantage PPO, which has its network of providers but also allows you to go out-of-network with higher co-pays and other out-of-pocket expenses.

Also becoming increasingly popular in more affluent areas is concierge medicine, essentially a private fee for service Medicare that is a contract between a patient and doctor, said Sarmiento.

Insulin co-pays will be capped

As older workers make their decision between Medicare or an employer plan, they should also be aware that under the Inflation Reduction Act of 2022, some of their prescription expenses under Medicare will be going down.

For example, beginning in 2023 and continuing through 2025, the Medicare Part D co-payment for insulin will be capped at $35 per month and beginning in 2025, the maximum out-of-pocket expense Medicare enrollees will pay for prescription drugs will be limited to $2,000 per year.

Those and other changes mandated by the Inflation Reduction Act should all go into the equation as workers 65 and older determine whether Medicare or an employer plan will work better for them.

“This will be very helpful for people with expensive medicines,” said Sarmiento.

Here are a few scenarios that may help guide your decision on your future healthcare coverage as you approach the end of your working career:

Wants to travel

Matt plans an active retirement that includes the kind of fun travel he’s never had time for during his career. He has grandkids in California, a daughter in New York and visiting every national park is on his bucket list. What type of Medicare coverage would be best for him?

Original Medicare allows an enrollee to go to any hospital or doctor in the United States as long as the providers take Medicare. That could be a plus for a frequent traveler. A Medigap policy also may cover a foreign travel emergency.

Medicare Advantage plans can be more restrictive.

While a Medicare Advantage HMO would pay for an emergency room visit anywhere in the United States, it wouldn’t pay other out-of-network expenses and the network might be limited to South Florida or Florida only. A PPO allows a patient to go outside-network but co-pays may range anywhere from 20 to 50 percent, said Sarmiento.

Some Advantage plans also offer a foreign travel benefit. “Historically most do not,” she said.

Needing dental coverage

Miguel is 64. He has a lot of dental work he has been putting off: a bridge and a couple crowns. He has good dental coverage at his workplace. Should he get his dental work done now or after he retires in a few years when he is on Medicare?

If he is considering original Medicare, it doesn’t cover dental costs.

Most Medicare Advantage plans pay for basic dental services such as exams, cleaning, fluoride, and x-rays but many don’t cover implants, bridges and other more complicated dental work or put restrictions on how much of these procedures they will cover. Most will also require the use of a network dentist and prior approval.

Still working at her company

Veronica is single, 66 years old, has no dependents and is still working at her longtime job. She’s always been on her firm’s group plan and planned to sign up for Medicare when she retires in a year or two, but the company recently switched insurance plans and she doesn’t like the new plan. The deductibles are high, the benefits less and not all her doctors are in the new network.

Veronica has options and doesn’t have to put up with a company plan that no longer works for her.

During a special enrollment period, she could inform Social Security that she wants to sign up for Medicare Parts A and B and forgo her company insurance plan, said Sarmiento. But since she has passed her 65th birthday and doesn’t want to incur a penalty, Sarmiento said she should get a letter from her employer stating that she has had insurance from the company since she was 65.

Hearing issues

Marta, 64, who works as an executive assistant, has noticed that her hearing isn’t quite what it used to be and wonders if she will need hearing aids soon. As she nears her 65th birthday, she should explore what her current employer plan pays for this high-ticket item and perhaps get her hearing aids now if the coverage is good.

If she decides to opt for original Medicare coverage as she continues to work, she should be aware that routine hearing exams, hearing aids and fittings won’t be covered. Original Medicare only covers a hearing exam when used to diagnose a medical problem and then the patient pays 20 percent after deductible.

Many Medicare Advantage plans do offer some coverage for hearing exams and hearing aids, but in some plans the out-of-pocket for hearing aids can still be substantial and Marta would most likely have to go to an in-network hearing aid provider.

What happens if you choose a Medicare plan you’re not happy with? “If it isn’t good for you, you have the Oct. 15 to Dec. 7 enrollment period and you can always change,” Sarmiento points out.