As most of us know, an individual who is enrolled in MedicarePart A or B is ineligible to contribute to a health savingsaccount. For that reason, insurance agents often advise theirclients to postpone their enrollment in Medicare until they retireand drop their group health coverage.

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With Medicare Part B, this is no big deal. When an individualdelays enrollment in Part B because she’s covered by an employer’sgroup plan, she has an eight-month “special enrollment period”during which she can sign up after losing her group coverage.

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With Medicare Part A, though, it’s not so simple. A little-knownrule in the Social Security Administration’s "Program OperationsManual System," an SSA handbook designed for internal use by SSAemployees in processing claims, says that anyone who opts out ofMedicare Part A also forfeits all past and future Social Securityretirement benefits. This means that seniors would stop receivingtheir Social Security check and would be required to repay anybenefits received prior to disenrolling from Part A.

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And, based on a recent court ruling, it doesn’t look like thisrule will be changing anytime soon. On March 21, Federal DistrictCourt Judge Rosemary Collyer dismissed a two-and-a-half yearlawsuit that sought to allow people receiving Social Securitybenefits to opt out of Medicare Part A. The lawsuit, known asHall v. Sebelius, was originally filed October 9, 2008 andargues that the two government programs are voluntary and that theapplication for each of these programs is not dependent on theapplication for the other. The judge disagreed.

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In dismissing the case, Judge Collyer said that “Requiring amechanism for Plaintiffs and others in their situation to‘disenroll’ would be contrary to congressional intent, which was toprovide ‘mandatory’ benefits under Medicare Part A for thosereceiving Social Security Retirement benefits.”

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Collyer concluded that the “Plaintiffs are trapped in agovernment program intended for their benefit. They disagree andwish to escape. The Court can find no loophole or requirement thatthe Secretary provide such a pathway.”

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So, until something changes, you may want to advise your clientsNOT to opt out of Medicare Part A. True, it will make themineligible to contribute to an HSA, but the tax benefits of an HSAprobably aren’t worth risking your Social Security check.

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