Although most people look forward to signing up for Medicare, some beneficiaries find themselves needing to disenroll. Whether you still carry employer-based insurance, have relocated overseas, or face other unique circumstances, it is essential to understand the process and repercussions of dropping Medicare before taking action.
Why Would You Want to Drop Medicare?
There are several common reasons beneficiaries think about canceling:
- Employer-based coverage: You are still employed and have comprehensive health insurance through your job
- Health Savings Account goals: You wish to keep making contributions to an HSA, which is prohibited once you are enrolled in Medicare
- Relocation overseas: You have moved to another country and secured local healthcare coverage
- Personal or religious convictions: Some people choose to opt out based on their beliefs
- Reducing expenses: Eliminating Part B premiums to lower your monthly costs
Dropping Medicare Part B
To cancel Medicare Part B, you must fill out CMS Form 1763 (Request for Termination of Premium Hospital and/or Supplementary Medical Insurance). Here is how:
- Call Social Security at 1-800-772-1213 and request the form
- Go to your nearest Social Security office in person
- If you are a railroad retiree, reach out to the Railroad Retirement Board
After your request is processed, Part B coverage will terminate on a date based on when you submitted the form, usually the first day of the next month.
Dropping Medicare Part A
Canceling Part A is considerably more involved and carries major consequences:
- You are required to reimburse all benefits that Medicare Part A has covered on your behalf
- You will also forfeit your Social Security retirement benefits, since the two programs are linked
- Part B cannot be retained without Part A
Given these requirements, very few beneficiaries actually go through with dropping Part A. It is typically only pursued under exceptional circumstances.
What Happens When You Cancel Medicare
Before you disenroll, weigh these potential consequences carefully:
Late Enrollment Penalties
If you drop Part B and decide to re-enroll later, you could be subject to a 10% premium surcharge for every 12-month period you were eligible but did not participate (unless you qualify for a Special Enrollment Period through employer coverage).
Gaps in Coverage
Canceling Medicare without securing an alternative plan leaves you without insurance, which can be financially catastrophic if you experience a serious illness or injury.
Medigap Issues
If you previously held a Medigap policy and dropped it when you canceled Medicare, you may be unable to obtain the same coverage again. Medigap policies require medical underwriting outside of your initial open enrollment window.
When Dropping Coverage Could Be Appropriate
Disenrolling may be a reasonable choice if:
- You carry creditable employer insurance that matches or exceeds Medicare's coverage
- You want to maximize your HSA contributions while you are still employed
- You are living permanently in another country with sufficient local healthcare
What to Do Before You Cancel
- Verify that your alternative coverage is creditable and comprehensive
- Learn about the penalties you may incur if you re-enroll in the future
- Speak with a benefits counselor through your State Health Insurance Assistance Program (SHIP)
- Retain documentation of your other coverage for any future enrollment needs
Dropping Medicare is a major decision with lasting implications. Make sure you thoroughly assess your situation before moving forward.