Still Working at 65? How to Legally Maximize Medicare Without Overpaying
Turning 65 does not automatically mean it is time to fully enroll in Medicare. For Americans who continue working past 65, Medicare decisions can either protect wealth or quietly erode it.
The key is not “beating” the Medicare system in a dishonest way. It is about understanding how the rules work and using them strategically.
Here are the core strategies for optimizing Medicare while still employed.
1. Compare Employer Coverage Before Enrolling
If still working at 65, the first step is comparing an employer group health plan with Medicare options. Not all coverage is created equal.
Key comparison points include:
- Monthly premiums
- Deductibles
- Maximum out-of-pocket limits
- Prescription drug coverage
- Whether family members are covered
In some cases, an employer plan provides stronger coverage at lower cost. In others, Medicare Part A and Part B may offer better financial protection.
Employees of small businesses (fewer than 20 employees) are generally required to enroll in both Medicare Part A and Part B because Medicare becomes primary coverage. For larger employers, the group plan usually remains primary.
2. Understand the Three Enrollment Options
For workers past 65, there are three common approaches:
Option 1: Decline Medicare Part A and Part B
This is appropriate if the employer plan is superior and qualifies as creditable coverage. There is no penalty for delaying Medicare in this situation.
Option 2: Enroll in Part A Only
Medicare Part A (hospital coverage) is typically premium-free. It can serve as secondary coverage behind an employer plan—but only if not contributing to a Health Savings Account (HSA).
Option 3: Enroll in Both Part A and Part B
This may be beneficial if the employer plan is expensive or offers weaker coverage. For employees at small firms, this is often required.
The correct decision depends entirely on plan details, not assumptions.
3. Stop HSA Contributions at the Right Time
One of the most overlooked rules involves HSAs.
Once enrolled in Medicare, even Part A alone, contributions to an HSA must stop. Continuing to contribute after Medicare enrollment can create tax penalties.
Because Medicare Part A can be retroactive up to six months when enrolling after 65, HSA contributions should typically stop several months before applying for Medicare.
For example, if planning to enroll in Medicare in January 2028, contributions should stop by October 2027 to avoid retroactive issues.
4. Automatic Enrollment Surprises
Individuals receiving Social Security benefits at 65 are automatically enrolled in Medicare Parts A and B. Medicare cards are mailed roughly 100 days before the 65th birthday.
If an employer plan is better, Part B can be declined, even after automatic enrollment.
To disenroll from Part B:
- Complete CMS Form 1763
- Submit it to the local Social Security office
- Receive a new card reflecting only Part A
Keeping Part A while declining Part B is common when employer coverage remains strong.
5. Use the Special Enrollment Period (SEP)
When employer coverage ends, individuals can enroll in Part B without penalties using a Special Enrollment Period.
To qualify:
- Employer coverage must have been creditable
- Form 40B must be submitted
- Proof of coverage is required
This prevents late-enrollment penalties and allows smooth transition to Medicare.
6. Watch Income Levels and IRMAA
High-income earners may face Income-Related Monthly Adjustment Amounts (IRMAA), which increase Part B and Part D premiums.
Medicare uses income from two years prior to determine premiums. Life changes such as retirement, divorce, or income reduction can justify an appeal.
Form SS-44 allows individuals to request reconsideration if income drops significantly. Even partial reductions in IRMAA can save hundreds of dollars per month.
7. Low-Income Assistance Programs
Medicare Savings Programs help lower-income retirees reduce or eliminate Part B premiums and cost-sharing.
Programs such as:
- QMB (Qualified Medicare Beneficiary) – Covers premiums and cost-sharing
- SLMB (Specified Low-Income Medicare Beneficiary) – Covers Part B premiums
Income thresholds apply, and qualification can substantially reduce healthcare expenses.
The Bigger Strategy
The real strategy is not about “gaming” the system. It is about understanding:
- When Medicare should be primary vs. secondary
- How HSA contributions interact with enrollment
- When automatic enrollment can be reversed
- How income impacts premiums
- How to transition smoothly without penalties
For workers past 65, Medicare is not one-size-fits-all. Timing matters. Employer size matters. Income matters. HSA contributions matter.
Those who understand the system can legally optimize coverage and avoid unnecessary premiums or penalties. Those who ignore the details often overpay without realizing it.
Medicare decisions at 65 are not automatic, they are strategic.
