If you pay attention to Medicare news or politics, you may have heard of the BENES Act. In today’s volatile political world, it’s that rare piece of bipartisan legislation that’s already made it out of committee. Now we’re just waiting for Congress to vote. In this post, we explain what the BENES Act is and why it’s so important.
What Is the BENES Act?
The Beneficiary Enrollment Notification and Eligibility Simplification (BENES) Act is designed to help those who qualify for Medicare Part B but aren’t collecting Social Security when they turn 65. According to the Medicare Rights Center, it is part of a “series of Medicare-related bills” in a bipartisan package known as the BETTER Act (Beneficiary Education Tools, Telehealth, and Extenders Reauthorization).
What Would the BENES Act Do?
The BENES Act would ensure Americans approaching Medicare eligibility (i.e. age 65) receive advice and information about the program to avoid costly errors and penalties. It also aligns the annual and general enrollment periods so you don’t go months without coverage in the event you make a mistake. Finally, it creates a Special Enrollment Period (SEP) for exceptional circumstances similar to those offered to beneficiaries affected by natural disasters.
Currently, Medicare provides very little guidance on the program, your rights, how to enroll, or even that you have to enroll. And many people have no idea that they need to do anything, still believing that the process is automatic.
That’s because, for decades, eligibility for Medicare and Social Security were linked. Both went into effect upon your 65th birthday. Now, of course, that connection is gone.
Why Do We Need the BENES Act?
The full retirement age is currently 66 for those born between 1943 and 1954. From there, it gets a bit more complicated. But any way you look at it, full retirement is no longer 65.
Of course, you may decide to collect Social Security early. If you do, and you start receiving benefits at least four months before your 65th birthday, you will be automatically enrolled in Medicare. For everyone else, enrollment is not automatic.
Failure to sign up for Medicare during your Initial Enrollment Period (IEP) may result in significant financial penalties and gaps in coverage. According to the Medicare Rights Center, 2018 saw around 760,000 beneficiaries paying Part B late enrollment penalties. The average increase? A whopping 30 percent.
You pay that penalty for the rest of your life. And it’s for something you didn’t even know you had to do. The BENES Act seeks to address that by requiring the government to educate citizens approaching eligibility due to either age or disability.
Paying for Innocent Mistakes
The most common reason people delay signing up for Medicare is that they already have good health insurance through an employer. And, most of the time, this is enough to qualify you for an SEP, which allows you to sign up late and pay no penalty. However, if there is any change in employment status, even if your coverage remains exactly the same, the clock starts ticking. And nobody tells you.
For example, Mr. and Mrs. Smith have health insurance through Mrs. Smith’s employer when hubby turns 65. A couple of years later, a merger puts Mrs. Smith out of a job, shortly before her own 65th birthday. She feels lucky when she learns her termination includes two years of continued health coverage, all paid for by the company.
What neither knows is that, losing her job took Mrs. Smith out of the “actively” employed category. That meant she and Mr. Smith had 8 months to take advantage of the Special Enrollment Period. (The time limit for each SEP varies.)
Of course, Mr. and Mrs. Smith don’t discover this until 2 years later, when they try to enroll in Medicare. Although they’re able to enroll in Part A, they have to wait for General Enrollment in January to sign up for Part B. And then, they have to wait until July for coverage to begin.
Mr. and Mrs. Smith both wind up with a 20 percent Part B late enrollment penalty and go nearly a year without medical insurance. All because of something they didn’t even know they had to do.
The BENES Act will guard against these types of innocent mistakes by informing people BEFORE they turn 65 what their rights and responsibilities are.
What Will These Mistakes Cost You?
Late penalties vary depending on the Medicare Part (A, B, or D) and how late you were enrolling.
Most people qualify for premium-free Part A. If you don’t, though, you’ll pay 10 percent for twice the number of years you could have signed up but did not. In the Smith example above, that would be 4 years (2 years late x 2).
The Part B late enrollment penalty is 10 percent for every year you delay. Again, using the Smith example, that would be 20 percent for each spouse, per month, for life.
Part D is different. It’s based on the number of months you go without creditable prescription drug coverage. That number is multiplied by 1 percent of the National Base Beneficiary Premium, which changes every year. It’s $33.19 in 2019 and will be $32.74 in 2020. So, using the Smith example, the calculation looks like this:
(33.19 x 0.01) x (24 months) = $7.96
You then round that number to the nearest dime. So, the Smith’s Part D penalty would be $8 per month (for each spouse) in 2019. It drops to $7.90 in 2020.
Talk to a Medicare Broker
Although it’s encouraging that Congress is considering the BENES Act, we have a long way to go. If you have questions or are confused about your Medicare options, the licensed agents at Medicare Solutions can help. Just call us toll-free at 855-350-8101. You can also use our online tool to compare plan options in your area.