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What Every American Needs to Know about Social Security
and the Mandatory Medicare-Enrollment Policy

Government Imposes a Huge Financial Penalty on Seniors
Who Reject Socialized Medicine

Feburary 11, 2005

Did you know that when you retire and apply for Social Security, you will be forced to enroll in Medicare Part A (the socialized hospital program) or forgo your cash benefits? That's Social Security Administration policy. In other words, if you prefer to keep/pay for your private health insurance and reject Medicare Part A, you will pay a huge financial penalty.1

Additionally, once enrolled, the only way to get out of Medicare Part A is to pay back all the Social Security benefits you ever received, plus any money paid on hospitalization coverage.

Why should you care about this? What is the source of the policy? How does the federal government enforce it? Was this how Medicare was supposed to work? What can be done to restore seniors' health freedom?

Why Should You Care about this Policy?

Why would anyone want to use private health insurance for services Medicare covers?

Just as many parents choose to pay for private schooling even though they've paid taxes and public school is "freely" available, seniors might opt to pay privately for their health care and insurance for a number of reasons.2 Consider the following:

  • Medicare has the final say on hospital and doctor fees and threatens to expel doctors from the program if they charge patients extra for "deluxe" versions of services already covered by the program.3

  • Medicare dictates what services and treatments are "medically necessary" and covered for seniors and disabled persons. Some patients have found that Medicare coverage has actually hurt, rather than helped, their treatment regimen.4

  • Medicare requires that claims be submitted to the federal government and audits provider/patient information for fraud and abuse. Seniors who want to maintain a truly confidential doctor-patient relationship might opt to pay privately.

What Federal Policy Dictates Mandatory Enrollment?

The Social Security Administration's HI 00801.002 "Waiver of HI Entitlement by Monthly Beneficiary" states:

Individuals entitled to monthly [Social Security] benefits which confer eligibility for HI [Hospital Insurance] may not waive HI entitlement. The only way to avoid HI entitlement is through withdrawal of the monthly benefit application. Withdrawal requires repayment of all RSDI [Retirement, Survivors, and Disability Insurance] and HI benefit payments made.5 [Emphasis added]

How Does the Federal Government Enforce Its Mandatory Enrollment Policy?

The federal government forces citizens to sign up for Medicare Part A when they apply for Social Security benefits. The Social Security Administration even combines the applications for both programs into a single form (see Appendix A). No form currently exists for Social Security benefits only. It's all or nothing.

Was Medicare Supposed to Work this Way?

No. When Medicare was created in 1965, Congress promised that the program would not interfere with citizens' freedom to purchase private health insurance. The original Medicare law (which amended the Social Security Act by creating Title XVIII-Health Insurance for the Aged) included the following provision (which remains unchanged):
Sec. 1803. OPTION TO INDIVIDUALS TO OBTAIN OTHER HEALTH INSURANCE PROTECTION: Nothing contained in this title shall be construed to preclude any State from providing, or any individual from purchasing or otherwise securing, protection against the cost of any health services [emphasis added].6

Additionally, the original Medicare law stated in Section 1802, "[F]ree choice by patient guaranteed."7 But this provision was amended and seniors' freedom was limited with passage of the Balanced Budget Act of 1997. That law included Section 4507, which penalizes physicians who accept private payment for Medicare-covered services: any doctor who does so must stop seeing all Medicare patients for two years. The United Seniors Association challenged this rule in federal court, but the court avoided the issue, ruling only that non-covered services could be privately paid for.8,9

What Can Be Done to Restore Seniors' Health Freedom?

Given the coming financial challenges to both Social Security and Medicare, this freedom-reducing policy must be reconsidered now. To ensure that all Americans are free to pay privately for the health insurance and medical care of their choice, Congress should:

  1. Sever the link between Social Security and Medicare Part A, so that enrollment in the latter is not a condition of receiving benefits from the former. The applications for the two programs should be separated.

  2. Repeal Section 4507 of the Balanced Budget Act of 1997 (Sec. 1802(b) of the Social Security Act) to nullify the two-year penalty on physicians who accept private payment for Medicare-covered services.

  3. Ensure that all citizens are free to maintain private contracts and thus establish truly confidential doctor-patient relationships.

These policy changes will help ensure that physicians are most responsive to individual patients, rather than to the federal government.


1. Social Security Administration, Policy No. HI 00801.002, "Waiver of HI Entitlement by Monthly Beneficiary." See also a letter to U.S. Rep. Ron Paul, M.D., regarding a woman attempting to apply for Social Security benefits without enrolling in Medicare Part A,

2. Sue A. Blevins, Medicare's Midlife Crisis (Washington, D.C.: Cato Institute, 2001).

3. Robert Pear, "U.S. Warns about Care Doctors Offer for Extra Fees," New York Times, April 13, 2004.

4. Institute for Health Freedom, "How Medicare Rx Drug Coverage Affects Patient Choice: A Firsthand Account," August 14, 2003,

5. Social Security Administration, Policy No. HI 00801.002, "Waiver of HI Entitlement by Monthly Beneficiary."

6. Commerce Clearing House, Inc., Complete Guide to Medicare (New York: CCH, 1967).

7. Ibid.

8. Institute for Health Freedom, "Appeals Court Rules in United Seniors Association v. Shalala," October 5, 1999,

9. United Seniors Association v. Shalala (No. 98-5142, Decided July 16, 1999), United States Court of Appeals for the District of Columbia Circuit.