Are you nearing your 65th birthday? Three months before your big day, you’ll receive information in the mail about your Medicare Initial Enrollment Period (IEP). Don’t let Medicare enrollment overwhelm you – you’ll have plenty of time to become a Medicare wiz before it’s time for you to enroll. Your Open Enrollment Period lasts seven months: three months before, through the month of, and three months after your 65th birthday.
You may be wondering: what if I don’t enroll in Medicare during this time period? Unfortunately, you may be looking at some penalties. Medicare late enrollment penalties typically impact those who try to enroll in Medicare outside of their designated Initial Enrollment Period.
What Is the Medicare Late Enrollment Penalty?
As you’re doing your research, you’ll learn that there are four parts to Medicare: Medicare Part A, Part B (Original Medicare), Part C (Medicare Advantage), and Part D (Medicare Prescription Drug Coverage). There are different penalties for enrolling late into most of the different parts of Medicare. Let’s dive into the specific penalties for Part A, Part B, and Part D.
Medicare Part A Late Enrollment Penalty
Thankfully, most people don’t have to worry about enrolling in Medicare Part A. It’s common that you will automatically qualify for Medicare Part A when you turn 65. If this happens for you, you’ll typically receive Part A premium-free. How do you know if you’re eligible for automatic enrollment into premium-free Part A? Well, you are automatically eligible for a premium-free Part A if you or your spouse worked at least 40 quarters (10 years) in the United States.
There may be cases where you or your spouse might not meet the requirements to qualify for a premium-free Part A. If you find yourself in this position, don’t worry. However, it’s important that you enroll when you first become eligible. If not, you might be subject to the Medicare Part A late enrollment penalty. Unfortunately, this penalty may increase your monthly premium by up to 10%. In most cases, you might have to pay this increased premium for double the number of years you could have had Part A but did not sign up.
Let’s give an example. If you qualified for Part A for three years but didn’t sign up until the third year, you would typically have to pay an increased premium for six years. That’s why it’s important to enroll as soon as possible: we want you to have that money that you’d pay in penalties, in your pocket instead.
Medicare Part B Late Enrollment Penalty
Much like Part A, many people receive automatic enrollment in Part B. This is most likely the case if you are already receiving Social Security or Rail Road Retirement Benefits. If you are not automatically enrolled in Part B, we encourage you to enroll when you first become eligible. If you wait too long, you might have to pay the Medicare Part B late enrollment penalty.
Unlike Part A, you’ll typically have to pay a Part B penalty for as long as you have Part B. Your penalty has the potential to increase up to 10% for every year you were eligible but did not sign up.
Let’s give another example. Say you were eligible for Part B for four years before you decided to sign up. In that scenario, the cost of your penalty would be 40% of your monthly premium. Medicare may add add this amount to your Medicare Part B monthly premium.
Remember: Part B is completely elective. You’re not required to enroll in Part B, but we do encourage you to enroll so you have coverage for outpatient medical services.
Medicare Part D Late Enrollment Penalty
Medicare Part D is your prescription drug coverage. Unlike Medicare Part A or Medicare Part B, you won’t be automatically enrolled in Part D; you must enroll yourself. Taking this part of Medicare is not required, but we do encourage you to enroll. The enrollment period for Part D is the same as Parts A and B, which starts three months before your 65th birthday, through the month of your 65th birthday, and three months after your 65th birthday.
For Part D, you may have to pay a late enrollment penalty if you don’t enroll during your initial enrollment period or for any continuous period of 63 days or more after your IEP is over, and don’t already have any credible prescription drug coverage. In most cases, Medicare considers prescription drug coverage from programs such as Medicare Part C (Medicare Advantage), a current or former employer, TRICARE, Indian Health Service, Department of Veterans Affairs, or any other Medicare health plan that offers prescription drug coverage as credible prescription drug coverage.
Part D penalties are more complicated than those of Parts A or B. The way it works, Medicare multiplies 1% of the “national base beneficiary premium” ($33.19 in 2019) times the number of full uncovered months you didn’t enroll in Part D or have coverage. This premium is rounded to the nearest 10 cents and added to your monthly Part D premium. The national base beneficiary premium may increase each year, so your penalty amount may also increase each year.
Let’s break it down in a real-world example. Say you don’t enroll in Part D for 20 months. If this were the case, your multiplier would be .20 (or, a 20% penalty). This number would be multiplied by the national base ($33.19 in 2019) and rounded to the nearest 10 cents. This totals to $6.70. This $6.70 penalty would be added to your monthly premium. It’s best to avoid this – try enrolling in Part D as soon as you’re able if you need to take any prescription medications.
Are There Any Exceptions to the Medicare Late Enrollment Penalties?
For Parts A and B, you may not have to pay a late enrollment penalty if you qualify for a Special Enrollment Period. You might qualify for a Special Enrollment Period if you were eligible for Medicare but didn’t enroll because you were still working. This would exempt you from penalties.
For example, if you or your spouse recently stopped working and were previously covered by your job’s insurance plan, your Special Enrollment Period begins anytime you are still covered by your job’s plan, or during an eight-month period starting the month your employment or your coverage ends.
For Part D, you will not have to pay a late enrollment period if you qualify for Extra Help.
Is There a Late Enrollment Penalty for a Medicare Supplement Plan?
Thankfully, there are generally no late enrollment penalties for Medicare Supplement plans. Your enrollment period for a Medicare Supplement plan starts once you enroll in Part B and lasts for six months. While you won’t have to pay a late enrollment penalty if you miss your Medicare Supplement open enrollment period, you’ll have to undergo medical underwriting when applying for your Medicare Supplement plans.
That’s where we come in. If you are in the process of enrolling in Medicare and you’re looking to save as much money as possible and avoid late enrollment penalties, this is the time to enroll in a Medicare Supplement plan. We’re here to guide you through the steps of enrollment and provide you with as much information as we can for all of your Medicare questions.
Take control of your health and don’t get stuck with a penalty or a higher Medicare Supplement premium. Let us help.
Nothing on this website should ever be used as a substitute for professional medical advice. You should always consult with your medical provider regarding diagnosis or treatment for a health condition, including decisions about the correct medication for your condition, as well as prior to undertaking any specific exercise or dietary routine.