Medicare Automatic Enrollment: How Does It Work?

You should have a say in the kind of health insurance plan you have. Unfortunately, that’s not always the way it works out.

When it comes to Medicare, the government could sign you up automatically, or an insurance company can sign you up for one of their plans without your permission. Know your rights, or you could literally pay the price.

Your Medicare Options

When you turn 65 years old or have a qualifying disability (U.S. citizenship and/or legal residency requirements also apply), you may be eligible for Medicare. Medicare is not one-size-fits-all, so you have important decisions to make.

First, you must decide if your medical needs are better met by Original Medicare or a Medicare Advantage plan:

• Original Medicare: This type of Medicare includes Part A and Part B with an option to sign up for a Part D prescription drug plan. This option offers coverage from Medicare providers nationwide. A broad range of services is covered.
• Medicare Advantage: This is your Part C plan. Some plans may also include a Part D prescription drug plan. With the exception of emergency care, your coverage is usually limited to providers within your local network. However, these plans may offer supplemental benefits for services that Original Medicare does not cover, e.g., corrective lenses, dentures, and hearing aids.

Second, you must decide what type of plan is best for your wallet:

• Original Medicare: There is no cap on out-of-pocket spending, but you could qualify for subsidies through Medicare Savings Programs that could cut costs. Also, you could elect to sign up for a Medicare Supplement Plan, also known as a Medigap plan, to help pay off your deductibles, coinsurance, copays, and other expenses.
• Medicare Advantage: There is a cap on out-of-pocket spending based on whether services are in or out of network. In 2021, this is set at $7,550 for in-network costs. Keep in mind, this does not include the cost of monthly premiums.

Automatic Enrollment for Original Medicare

You are automatically enrolled in Original Medicare (Parts A and C) if you are actively receiving Social Security benefits when you become eligible.

This occurs when you turn 65 years old or have a qualifying disability and have been on Social Security disability insurance (SSDI) for 24 months. (You are automatically enrolled in Medicare in your 25th month.) In these cases, your premiums will be deducted from your Social Security check.

Pros:

• Whether you are on Original Medicare or a Medicare Advantage plan, everyone has to pay Part B premiums (most people get Part A premium-free). Medicare Advantage plans, with some exceptions, charge their own monthly premiums. From this vantage point, Original Medicare is the cheapest option, at least when it comes to having access to Medicare.
• Automatic enrollment means you will be enrolled on time. You will be able to avoid late penalties for Part A or Part B, some that could last as long as you have Medicare.

Cons:

• Enrollment in a Part D prescription drug plan is not automatic, and you still need to take steps to sign up for a plan if you want one. Part D late penalties could apply if you sign up too late.
• If you want a Medicare Advantage plan instead, you need to be proactive. Pay attention to the Medicare calendar. If you do not change to a Medicare Advantage plan during your initial enrollment period, you will have to wait until the annual open enrollment period (October 15 to December 7).  

Default Enrollment for Medicare Advantage

Enrolling someone in a plan that could be more expensive than Original Medicare is another issue.

The Balanced Budget Act of 1997 made an important change when it came to Medicare enrollment. Specifically, it allowed for seamless conversion, a practice where a private insurance company could automatically enroll you in one of their Medicare Advantage (Part C) plans.

This was not a free-for-fall. Insurance companies had to apply for approval by the federal government to participate in seamless conversion. They could only enroll people who were newly eligible for Medicare and were already members of one of their other health plans.

For example, the insurance company that provided your employer-sponsored health plan or Medicaid plan could change you to one of their Medicare Advantage plans when you turned 65.

However, concerns were raised that people were being signed up for Medicare Advantage plans they could not afford, or plans with networks that limited their care options (e.g., their current doctors or hospitals may not be covered). In response to the backlash, the Centers for Medicare & Medicaid Services (CMS) suspended parts of seamless conversion in 2016.

By 2018, default enrollment—the new term for seamless conversion—was limited to people dual-eligible for both Medicaid and Medicare. People receiving Medicaid plans from a private insurance company can now be automatically enrolled in a certain type of Medicare Advantage plan, known as a Special Needs Plan, offered by that same company.

These plans, D-SNPs, must have at least a three-star rating and be approved by their respective state Medicaid program. Beneficiaries will remain on both plans with the goal that they receive comprehensive, affordable coverage.

Automatic and Facilitated Enrollment for Part D

People who qualify for full Medicaid benefits or other qualifying low-income subsidy (LIS) programs (Extra Help, Medicare Savings Programs, Social Security Insurance) may face another type of automatic enrollment regarding prescription drug coverage.

This process is referred to as automatic enrollment for people who are dual-eligible for both Medicaid and Medicare and as facilitated enrollment for people who qualify for an LIS.

If you are enrolled in Original Medicare, CMS will enroll you in a prescription drug coverage (Part D) plan if you do not choose one yourself. The plan they choose for you will be a benchmark plan that offers basic coverage and has a monthly premium less than the state’s regional thresholds.

If you are enrolled in a Medicare Advantage plan that does not have prescription drug benefits (MA-only), the insurance company that offered your chosen plan can change you to one that does (MA-PD).

If that company does not offer an MA-PD, they may enroll you in one of their standalone Part D plans. The catch is that the insurance company has to select the lowest cost option for combined Part C and Part D premiums.

There may be reasons you do not want to sign up for a Part D plan (e.g., you have creditable coverage from another source). You can always opt out of a plan.

Alternatively, you may want to pick a more extensive plan than the one assigned to you. You can change to a plan of your choice during one of the quarterly special enrollment periods for Medicaid and Extra Help beneficiaries, or during the annual Medicare open enrollment period.

A Word From Verywell

Decisions about Medicare are not always easy to make, but when someone else makes them for you, you could end up with a health plan that does not meet your needs. Make sure you understand the enrollment process and take steps to make changes as needed.