Stuck with a Medicare penalty? Here's some help

Each year, thousands of Americans miss their deadline to enroll in Medicare, and federal officials and consumer advocates worry that many of them mistakenly think they don't need to sign up because they have purchased insurance on the health law's marketplaces. That decision can leave them facing a lifetime of enrollment penalties.

Now Medicare has temporarily changed its rules to offer a reprieve from penalties for people who kept Affordable Care Act policies after becoming eligible for Medicare.

"Many of these individuals did not receive the information necessary [when they became eligible for Medicare or when they initially enrolled] in coverage through the marketplace to make an informed decision regarding" Medicare enrollment, said a Medicare spokesman, explaining the policy change.

Those who qualify include people 65 and older who have a marketplace plan or had one they lost or canceled, as well as people who have qualified for Medicare due to a disability but chose to use marketplace plans.

They have until Sept. 30 to request a waiver of the usual penalty Medicare assesses when people delay signing up for Medicare's Part B, which covers visits to the doctor and other outpatient care. Medicare beneficiaries who already pay the penalty because they had a marketplace plan can request that it be eliminated or reduced.

Medicare also imposes a waiting period for coverage on people who do not sign up when first eligible. If they meet the waiver requirements, they now can request that be lifted.

"This has been a problem from the beginning of the Affordable Care Act, because the government didn't understand that people would not know when they needed to sign up for Medicare," said Bonnie Burns, a consultant for California Health Advocates, a consumer group. "Once they had insurance, that relieved all the stress of not having coverage and then when they became eligible for Medicare, nobody told them to make that change."

One of them is Lisa Grimes' 49-year-old sister, who receives Social Security disability benefits because of mental illness. She became eligible for Medicare because she receives those disability benefits but had marketplace coverage at that time.

For the past year, Grimes, a St. Louis real estate lawyer, has been trying to unravel the problems that ensued after her sister opted to keep her marketplace plan and drop her Part B coverage, probably because her marketplace premium at the time cost half as much. Only after that $50 monthly premium ballooned to $360 did they learn that marketplace customers lose their premium subsidies when they join Medicare. (Grimes agreed to be interviewed as long as her sister was not identified.)

Other Medicare beneficiaries have made similar mistakes by assuming they didn't need Part B if they had a marketplace plan, retiree coverage from a former employer or coverage through a current employer with fewer than 20 workers or with the Department of Veterans Affairs. None of these is a substitute for Medicare Part B.

Grimes said her sister couldn't afford the new marketplace premium and had to drop her plan last year. The Social Security Administration denied her appeal to reinstate her Part B coverage with no penalty or wait period. Then she learned about the new Medicare waiver from a Missouri counselor at the State Health Insurance Assistance Program.

It took several hours for Grimes to find the right letters and other documents needed to apply since her sister's "filing system was a large shopping bag," Grimes said. With assistance from the Medicare Rights Center, her sister received Part B coverage without a late fee or waiting period. It was retroactive, so she might be reimbursed for the medical bills she paid last fall and winter when she had no insurance coverage for doctor visits.

People need to sign up for Part B usually within three months before or after turning 65 if they aren't getting job-based insurance, or when their job-based health insurance ends if they are older than 65, according to Medicare rules. Most people under 65 who receive Social Security disability benefits qualify for Part B after 24 months of benefits.

Under the health law, people who qualify for Medicare will lose subsidies in the online exchange plans. And enrolling in one of those plans does not protect them from a permanent late enrollment penalty.

Marketplace insurers, who are often the first to spot when a member is turning 65, are barred under the health law from canceling coverage because that member may qualify for Medicare, Burns said. They are required, however, to cancel a Medicare-eligible member's subsidies.

Last summer, Medicare officials began sending emails each month to about 15,000 people with subsidized coverage through the federally run marketplace. The notices target people approaching their 65th birthday and tell them how "to avoid an unwanted overlap in Marketplace and Medicare coverage." Officials also began contacting individuals who already have both Medicare and subsidized marketplace coverage, urging them to discontinue the latter.

Yet the warnings have missed some people with marketplace coverage, who could find themselves on the hook to cover their own medical bills if their private insurer indicates they should have been on Medicare and refuses to pay.

"These are very complex rules," said Stacy Sanders, federal policy director at the Medicare Rights Center, a consumer advocacy group that spearheaded an effort in 2015 by nearly 50 unions, insurance companies and seniors' advocacy organizations urging Medicare officials to address the problem. "The lack of good notification was leading people down a dangerous path in terms of declining or delaying Part B."

Those who enroll in Part B 12 months or later after becoming eligible can face a permanent penalty of 10 percent added to the Part B premium for each full 12-month period that a beneficiary could have had Part B, but didn't enroll. This year, the Part B standard average monthly premium is $109.

Medicare began emailing letters in March about the temporary waiver to some people 65 and older who are enrolled in plans sold on the marketplaces run by the federal government. But the federal government is not reaching out to others who may be eligible.

California, with the largest state-run marketplace — serving 1.4 million consumers — is planning a similar information campaign. So are some other states that run their own marketplaces, including Connecticut, Massachusetts and New York.

For information on how to apply for the waiver, officially called "time-limited equitable relief," go to the Medicare Rights Center's Medicare Interactive webpage or call the center's helpline at 800-333-4114.

Kaiser Health News, a nonprofit health newsroom whose stories appear in news outlets nationwide, is an editorially independent part of the Kaiser Family Foundation.