Personal Finance

Bipartisan bill to prevent costly Medicare mistakes advances in the House

Key Points
  • About 60% of 65-year-olds were on Social Security in 2016, compared with 92% in 2002, as more older people have kept working.
  • Consumer advocates expect that change to result in a growing number of older individuals experiencing costly mistakes when they enroll in basic Medicare.
  • The BENES Act, which cleared committee Wednesday, aims to minimize the chance that beneficiaries get slapped with life-lasting late-enrollment penalties.
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Medicare might become a bit easier to navigate.

A congressional measure that would help prevent costly enrollment mistakes cleared a House committee on Wednesday as part of a group of bipartisan-backed health-care bills. The next step would be a vote by the full chamber, although it's uncertain when that might occur.

"The intent was for all those health bills in the committee markup to be nonpartisan and noncontroversial," said Lindsey Copeland, federal policy director for the Medicare Rights Center, an advocacy group. "We hope the [BENES Act] makes it to the floor pretty easily."

A companion bill in the Senate continues to idle in the Finance Committee.The Medicare-related measure in the House, called the BENES Act, would do several things, including eliminating certain delays between signup and coverage, as well as offer outreach to people about their responsibilities as they near the Medicare-eligible age of 65.

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Roughly 62.4 million individuals — the majority of whom are 65 or older — are enrolled in Medicare. While people who tap Social Security before that Medicare-eligible age are automatically enrolled, a growing share of older folks are delaying their benefits beyond that age, research shows.

In 2016, 60% of 65-year-olds were on Social Security, compared with 92% in 2002, according to a 2019 report from the Medicare Payment Advisory Commission. 

The upshot is that consumer advocates expect a growing number of older individuals to run into costly mistakes when they enroll in basic Medicare, which consists of Part A (hospital coverage) and Part B (outpatient care and medical equipment). While there are no late-enrollment penalties related to Part A, the same can't be said for signing up late for Part B.

That penalty, which equates to 10% of the standard Part B premium for each 12 months that you should have been enrolled but were not, also can increase each year as the premium adjusts annually. Be aware that 65-year-olds who meet an exception — for example, they have qualifying group health insurance at work — can delay enrolling. However, down the road when they lose that coverage, they still have deadlines to meet (or potentially face those same late enrollment penalties).

Retiree health costs
Retiree health costs

In 2019, about 764,000 people paid the Part B late-enrollment penalty, according to recent congressional research. On average, that pushed their premiums up by 28%. Based on the 2020 standard Part B premium of $144.60, that would mean an additional $40 monthly, or $184.60 total (although some beneficiaries either pay more or less than the standard).

"It's very complex and requires people to understand different rules, how other coverage overlaps, and all the timelines," Copeland said. "The consequences of any missteps in the Part B enrollment process are significant."

The BENES Act also would require coverage begin the month after signing up for certain beneficiaries who currently experience a delay in their coverage.

For those who sign up on their own during their seven-month "initial enrollment period" at age 65, enrolling toward the end of that window can result waiting months for coverage to kick in.

You could sign up Jan. 2 and have to wait seven months for coverage to kick in.
Lindsey Copeland
Federal policy director for the Medicare Rights Center

There also is a delay for those who have to sign up during the "general enrollment period," — Jan. 1 through March 31 of each year — due to missing their initial signup window. In that case, coverage doesn't start until July 1.

"You could sign up Jan. 2 and have to wait seven months for coverage to kick in," Copeland said.

The BENES Act also requires that the Health & Human Services Secretary submit a report about how to most effectively align the early year general enrollment period for Parts A and B with the annual fall open enrollment period, which is for enrollment related to different parts of Medicare — Part C Advantage Plans and Part D prescription drug plans.

An earlier version of the bill would have made that change instead of requiring further study on the issue.

The BENES Act also would give the government the authority to declare a special enrollment period for Parts A and B for people who experience "exceptional circumstances" regarding an emergency or disaster, Copeland said.

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