Six Special Situations In Signing Up For Medicare Part B

American Medicare rules are complicated, and they are about to become even more complicated. Nearly every American benefits from signing up for Medicare Part A and Medicare Part B during the three months before their 65th birthday, but some situations require special handling. Here are 10 potential traps resulting in expensive gaps in Medicare coverage and lifetime part B premium surcharges that you can avoid.

1. You could access Medicare services except you don't live in the United States.

Medicare is available to every American citizen (although some who did not pay into the system will have to buy even basic coverage), but Medicare-covered services are only available to American citizens and permanent residents who live in the United States. (There are a few exceptions for residents of portions of Minnesota and Washington state who can only reach certain healthcare providers in Canada.)

Medicare won't pay for services provided outside the United States. But if you want to come back to live in the USA permanently later, you don't want to pay extra for enrolling in the system late. 

If you spend even part of the year in the United States, consider enrolling in Part A and Part B even if you live abroad. You may be able to schedule expensive procedures for times you will be in the United States, and you will avoid the 10% surcharge for every year after 65 that you don't sign up.

2. You have health insurance coverage through your employer, but it has a high deductible.

As long as you maintain continuous health insurance coverage through your employer, you don't have to sign up for Medicare Part B to avoid a late enrollment penalty. (But be aware that Medicare does not operate on an honor system. They will definitely check to make sure you had continuous coverage before they let you enroll in Part B after age 65 without paying a penalty rate for the rest of your life.) Some employer policies, however, have high deductibles or require seeing doctors or going to hospitals in a very limited network.

If deductibles or service networks are a problem, it can make sense to go ahead and sign up for Part B. The $100-$200 a month you pay for coverage can go a long way toward paying deductibles of $5,000 or $10,000 or more.

3. You're the boss where you work (or you are self-employed), and you decide you like the policy you have now, so you continue coverage under COBRA.

COBRA, in this context, does not refer to the snake but instead to the Consolidated Omnibus Budget Reconciliation Act of 1985, which first allowed people to continue to be covered by employer health insurance after they left their jobs. COBRA coverage almost always requires paying the full premium, but it is useful if you want to continue seeing the same doctors and going to the same hospitals that you could access while you were employed.

The potential in electing COBRA after the age of 65 is that the company has to continue to offer the policy after you retire for you to be covered by it. This gets tricky if you happen to own the company that was providing your healthcare insurance. And even if your company offers continuous coverage, the Medicare people may apply special rules. You might be counting on getting your Part B when COBRA expires at $110 a month, but there could be some rule that makes it cost $500 a month if your COBRA doesn't count. Often it's best to get Part B sooner rather than later even if you continue your current coverage.

Three More Medicare Enrollment Situations Requiring Special Handling

Sometimes the Medicare rules are just plain unfair, especially to people who have paid in the most. Consider this situation:

4. You miss your special enrollment period.

Raymond worked at his hardware store until he was 88 years old. All the years he had been in business, he had maintained health insurance for himself, his wife, and his employees, but when it finally came time to sell his store, he needed to sign up for Medicare Part B. Unfortunately, Raymond got some bad advice.

A Social Security employee told Raymond that he could sign up for Medicare during the annual general enrollment period that comes around every year between January 1 and March 31. Unfortunately, he sold his business on April 1, which started the clock ticking on his special enrollment period--when he could avoid paying a 230%(10% x 23 years) penalty on his premiums that only lasted eight months, until December 1. Even worse, Raymond only sold the business because he needed his hip replaced.

What could Raymond do?

In this case, the only way for Raymond to get any coverage at all for the fifteen months between his sale of the business on April 1 in one year and the beginning of his Medicare coverage on July 1 the next year was to take COBRA on his store's policy--and that required the cooperation of the new owners. Getting bad advice from a Medicare representative didn't entitle him to faster coverage.

5. You "cash in" your sick leave and vacation time when you retire.

Many employers allow retiring employees to take their accumulated sick leave or vacation time when they retire. They either continue on the payroll for some weeks or months after they stop working, or they get a lump-sum payment for their accumulated leave. The way you take your leave pay when you retire makes a big difference in what you need to do for Medicare.

If you effectively retire from your job but continue to get a paycheck while your leave time is being used up, and you continue to be carried on your employer's insurance, you may qualify for a special enrollment period for Medicare Part B. Don't rely on your pay stub, however. Get a statement in writing that you are continuing to be covered by your employer's insurance while you are getting leave pay.

If you get lump sum payment for your leave time, then you don't get an added grace period for enrolling in Part B. In this case, you need to sign up for your plan in the eight months after you retire or in the three months before your 65th birthday, whichever comes sooner.

6. You need Medicare and you need it right now.

Many Americans approach age 65 with little or nothing in the way of assets, earning too much for public assistance programs or sliding-scale or "free" clinics, but not enough to pay the $1000 to $4000 a month health insurance can cost with pre-existing conditions. Some people become desperate for care they simply cannot afford.

It's not much of a head start, but the Medicare rules allow for coverage starting on the first day of the month in which you turn 65, provided you sign up as soon as you are eligible. If you were born on April 29, 1948, for example, you can get coverage on April 1, 2013, for a few days to a few weeks while you are still 64, if you sign up right now.