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Refusing Medicare Coverage Can Be Costly for Those on Disability Insurance Who Don’t Know the Rules

Q. I was granted Social Security disability (on appeal) in November 2008 and in February 2009 I received a letter saying I would receive Medicare Part A retroactively to 2006 and could have Part B as well. As I was already covered by my husband’s Tricare military health benefits, I declined Part B. But now Tricare says I must repay the money it spent on my extensive medical bills in 2006-08. Is this true? If so, we face bankruptcy.

A. Unfortunately, it is true. And anyone who qualifies for Social Security disability insurance benefits (SSDI)—especially in situations where Medicare coverage is granted retroactively—needs to be aware of the consequences of declining Part B enrollment if he or she already has any kind of employer health insurance.

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If you qualify for Social Security disability soon after you first apply

In this situation, you do not get Medicare coverage immediately. Under current law, you must wait for 24 months after being approved for SSDI before Medicare health benefits under Part A (hospital coverage) and Part B (doctors’ visits and other outpatient services) can begin.

Once the 24 months have elapsed, you receive Part A automatically and get the option of enrolling in Part B. At this stage, if you already have health insurance from your own or your spouse’s employer, it is very important to contact the employer’s benefits administrators to find out what their policy is.

Some employer health plans (and Tricare is one of them) require enrollees who become entitled to Medicare—whether at age 65 or at an earlier age through disability—to enroll in Part B in order to remain eligible for the employer’s health benefits. If this is the case, Medicare becomes the primary coverage (meaning that Medicare pays claims first) and the employer plan becomes secondary. If the employer has fewer than 20 employees, Medicare usually becomes primary coverage automatically.

In these circumstances, if you don’t enroll in Part B at the right time, your employer insurance will not cover any of your bills for services that Medicare covers. The “right time” is during your seven-month initial enrollment period for Medicare, which lasts from three months before the month in which you receive your 25th disability check to three months after that month. For example, if your 25th check arrives (or is due to arrive) in April, you can enroll in Part B between January 1 and July 31. Once the initial enrollment period has expired, you can enroll in Part B only during open enrollment, which runs from January 1 to March 31, with coverage beginning July 1—and you’d also face a 10 percent penalty on your Part B premium for every full 12-month period that you’d delayed enrolling.

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If you are granted Social Security disability retroactively

This situation can happen if you apply for disability benefits, are turned down and then win your case on appeal. Social Security must then pay the benefits retroactively to the date when you first applied, which may be months or years earlier. If enough time has elapsed, Social Security also automatically gives you Medicare Part A coverage, backdated to the time when you would have qualified for it if you’d been granted SSDI when you first applied. Social Security also offers you Part B coverage retroactively if you want it—while making it clear that, if you accept, you must pay backdated Part B premiums for the time period in question, which can amount to hundreds or even thousands of dollars.

But here’s the problem: When offering Part B retroactively as an option, Social Security makes no mention of the consequences if you decline the offer because you already have coverage under an employer’s health insurance plan (either your own or your spouse’s). And if your plan becomes secondary to Medicare, as explained above, the consequences can be serious.

The employer plan can require you to pay back all the money it spent on your outpatient medical bills dating back to the time your retroactive entitlement to Medicare began—even though you weren’t actually entitled to Medicare during those years before you won your disability appeal. This applies to those bills that would have been covered by Part B. As retroactive Part A entitlement is automatic, the employer plan would retrieve any costs for hospital services from Medicare. (If you had also accepted Part B retroactively, the employer plan would bill Medicare, not you, for the outpatient bills it had previously paid.)

If you fall into this trap—probably because you had no idea of the consequences of declining Part B—what can you do? Although an employer plan can insist that you pay back the money it spent on those bills, this doesn’t necessarily mean that it will. Your best bet is to contact the benefits administrator of the plan and ask for help in resolving the problem. In some cases, the plan’s hands may be tied. For example, the reader who asked this question was covered by Tricare, the federal health plan for military personnel and their dependents. A Tricare spokesman explains that by law the program must seek repayment for bills Tricare has paid for enrollees entitled to Medicare, even retroactively. Nonetheless, he said, Tricare enrollees in this situation should contact the program for assistance.

Is it possible to ask Social Security to rescind your retroactive entitlement to Part A? Theoretically, that could eliminate the problem and allow your employer coverage to remain primary. But the Social Security Administration says that under the law “there are no provisions that allow a beneficiary to decide the effective date of their entitlement.” You do have the right to opt out of Part A completely. But if you went this route, under current law you would no longer be entitled to disability benefits and would have to repay Social Security for all the payments you’d previously received.

Bottom line: If you become eligible for Medicare on the basis of disability when you already have employer health insurance, always check with your plan’s benefits administrator to find out whether it will remain your primary coverage or become secondary to Medicare. And if Medicare would become primary, be sure to enroll in Part B when you are offered it.

For information on whether Medicare is usually primary or secondary in different situations, see the official publication “Medicare and Other Health Benefits: Your Guide to Who Pays First.

Patricia Barry is a senior editor at the AARP Bulletin.

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