Take Care With Your Decision To Enroll in Medicare Part A.
Peter contacted my company about his situation recently. He is 68 years old and still working. He enrolled in Part A two years ago because his company’s group health plan was terrible. He was probably going to need surgery and the hospital deductible was outrageous (his words). He changed jobs recently and his new employer’s policy is much better. He wants to set up a Health Savings Account (HSA). So how can he drop Part A?
This isn’t the first time I’ve been asked this question. Let’s start with some basics.
- Part A, hospital insurance, is premium-free for those who have worked and paid taxes for at least 10 years (40 credits) or have a spouse who has.
- Those who do not have 40 credits can purchase Part A and pay monthly premiums. Individuals who have earned at least 30 credits pay $278 every month and those with fewer than 30 pay $506.
- This part of Medicare covers four services: inpatient hospitalization, skilled nursing facility stays, home health care, and hospice care. In Peter’s situation, Part A is the secondary payer to Medicare. It may provide additional coverage and help with costs up to the Part A limits.
- Once enrolled, an individual is no longer eligible to contribute to an HSA, which is why Peter wants to disenroll from Part A.
Look to the law
My answer to his question about dropping Part A was probably not one Peter wanted to hear. Unfortunately, there is nothing he can do. According to the Centers for Medicare and Medicaid Services (CMS), “Individuals entitled to premium-free Part A cannot voluntarily terminate their Part A coverage. This is not permitted by law.” In other words, only those who pay a premium for Part A can disenroll.
When I shared this, Peter pushed back. The human resources director at his company gave him a form to complete. The form is titled, “Request for Termination of Premium Part A, Part B, or Part B Immunosuppressive Drug Coverage.” The instructions note:
- Who can use this form? People with Medicare premium Part A or B who would like to terminate their hospital or medical insurance coverage.
- Use this form: If you have premium Part A or Part B but wish to no longer be enrolled.
Peter has premium-free Part A and, by law, he cannot terminate Part A.
No requirement to enroll in Part A
Peter isn’t alone in wanting to drop Part A. I have heard from others who enrolled because someone told them they had to sign up for Part A at age 65. Here are the facts.
- There is no rule or requirement that anyone must enroll in Part A.
- Those who are receiving Social Security benefits will be enrolled in Medicare automatically at age 65 and get their Medicare card in the mail. They must keep Part A; it is a condition of receiving benefits. (The decision about Part B, medical insurance, depends on the situation. The Medicare card includes instructions for those “who don’t want Part B.” Caution: You may not want Part B but it is possible that you need it. Take time to investigate your circumstances.)
- When applying for Social Security benefits after age 65, the applicant must also enroll in Part A.
- If not receiving benefits, an individual can put off Part A until ready to retire and give up the employer coverage.
Bottom line: The decision to enroll in premium-free Part A is not one you can undo at a later date. Evaluate your options and coverage opportunities between age 65 and retirement. If you enroll in Part A, you’ve basically decided there will be no HSA contributions in your future.
