There won’t be a commercial for it. You won’t get a notice in the mail. At best, it’ll be found in the middle of the Medicare booklet they mailed you. Medicare has a few penalties for not enrolling when first eligible, regardless of need. Medicare is a program that requires everyone who is able to participate in order to keep the books balanced. For this reason, they created penalties for not participating in the main parts of Medicare when you are first eligible. There are of course exceptions to avoid these penalties, but if you don’t know what those exceptions are, then in this case what you don’t know may cost you.
There are 3 main penalties in Medicare. If you do not enroll into Part A, Part B, or Part D when first eligible and you don’t have a qualifying exception, then you will be subject to a penalty when you do enroll at a later date.
Medicare Part A Late-Enrollment Penalty
Most people get Part A premium-free for having worked at least 10 years and paid Medicare taxes during that time. If you don’t happen to qualify for premium-free Part A, then you will need to manually enroll. If you do not enroll when eligible you will be subject to a 10% penalty for the monthly cost of your Part A monthly premium. This penalty will last for twice the amount of time that you went without having Part A from when you were first eligible. For example, if you go a whole year without enrolling into Part A, then you will pay an extra 10% for two years. After that, your cost will go back to the original amount. If you would like more information on enrolling in to Part A, please refer to our class on “How to Enroll into Medicare”. For more information on Part A costs, please refer to our class on “What does Medicare Cover?”.
Medicare Part B Late-Enrollment Penalty
If you don’t sign up for Part B when you’re first eligible, you’ll have to pay a late-enrollment penalty. The only exception is if you keep employer coverage and that coverage is deemed “Creditable”. This will qualify you for a Part B Special Enrollment Period (SEP) when you eventually decide you want to switch over to Medicare coverage. The Part B SEP is an eight-month period to enroll in Medicare Part B after you no longer have coverage from your employer. Using the Part B SEP also means that you will not have to pay a Part B late-enrollment penalty. Those with VA, Christian Medi-share policies, or any other forms of coverage will still be subject to the Part B penalty if they enroll.
Your monthly premium for Part B may go up 10% for each full 12-month period that you could have had Part B, but didn’t sign up for it. This late-enrollment penalty remains with you for as long as you have Part B. Also, you may have to wait until the General Enrollment Period (January 1 to March 31) to enroll in Part B, and your coverage will begin July 1 of that year.
Medicare Part D Late-Enrollment Penalty
The late-enrollment penalty is a dollar amount added to your Medicare Part D monthly premium for not having qualifying drug coverage. You may owe a late-enrollment penalty if you go without any of the following for 63 (or more) continuous days after you first enroll into Medicare Part A or B:
A Medicare Prescription Drug Plan (Part D)
A Medicare Advantage Plan (Part C)
Another Medicare health plan that offers Medicare prescription drug coverage
Creditable prescription drug coverage
We should explain the last option there. Creditable prescription drug coverage (also called “Creditable Coverage”) is coverage that’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. Most plans that offer prescription drug coverage, like plans from employers or unions, must send their members a yearly notice explaining how their prescription drug coverage compares to Medicare prescription drug coverage and if it’s deemed “Creditable Coverage”. If the Medicare beneficiary doesn’t receive a separate written notice, the individual’s plan may provide this information in its benefits handbook. If the individual doesn’t know if the prescription drug coverage he or she has is Creditable, the person should contact the plan to find out if their coverage is Creditable.
The cost of the late-enrollment penalty depends on how long you went without Part D or Creditable prescription drug coverage.
Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($33.19 in 2019) times the number of full, uncovered months you didn’t have Part D or Creditable Coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium. It’s important to know that this counts the two months (63 days) you had to miss to qualify for the penalty. So, if you go a whole year without coverage, you will pay:
12 (Months) x $0.33 (1% of $33.19) = $4 (rounded up from $3.96)
This $4 will be added to your plan’s premium.
Important Note!: If your plan doesn’t have a premium, such as many Medicare Advantage plans, you will still be billed the $4 monthly by the plan you enroll in. The national base beneficiary premium may increase each year, so your penalty amount may also increase each year.
For questions, a review of your situation, support in enrolling into Medicare or any other Medicare related service, please contact us at the option that best suits you.
How much is the late enrollment penalty for Medicare?
Generally, you will pay a 10% added penalty top your monthly Medicare premiums if you delay signing up for Part A or B when you are first eligible. For Both Part A and B, you will pay a penalty of 10% for every year that you go without signing up. If you get premium-free Part A then you will not have a penalty for Part A.
Why is there a late enrollment penalty for Medicare?
Medicare operates a lot like any other insurance company. To help keep costs as low as possible, they rely on the accumulative premiums paid by everyone to help pay the costs of those who are sick. If Medicare allowed people to enroll later, when their health is already giving them problems, then the costs to everybody would be much higher.
How can I avoid Medicare late enrollment penalty?
You can avoid the penalty by enrolling into Medicare when you first turn 65. Those who get Medicare for being disabled more than two years will be automatically enrolled. If you maintain health coverage through an employer, the VA, or any other coverage considered creditable by Medicare, then you will not be subject to a penalty.
How are Medicare Part B late enrollment penalties calculated?
The Part B penalty is calculated by multiplying the number of 12-month periods that you have gone without enrolling into Part B and multiplying that by 10% of your normal Part B premium.
What happens is I sign up for Medicare Part A late?
Generally nothing. For most people you will not have a penalty because most will get Part A premium-free for paying at least 10 years of Medicare taxes from working. If you do not enroll when eligible you will be subject to a 10% penalty for the monthly cost of your Part A monthly premium. This penalty will last for twice the amount of time that you went without having Part A from when you were first eligible. For example, if you go a whole year without enrolling into Part A, then you will pay an extra 10% for two years. After that, your cost will go back to the original amount.
What happens if I don’t have Medicare Part D?
If you go more than 63 days without Part D then you will have to pay a monthly penalty once you do choose to enroll. So as long as you don’t have part D they will not charge you. Once you do enroll, you will pay an added premium of 1% of the “national base beneficiary premium” ($33.19 in 2019) times the number of full, uncovered months you didn’t have Part D or Creditable Coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium. It’s important to know that this counts the two months (63 days) you had to miss to qualify for the penalty. In our experience, eventually most people will be taking some sort of medications as they get older. The most affordable Part D plans are around $12-15 a month. This can be cheaper than what kind of penalties you may pay later over time.
What if I missed open enrollment for Medicare?
If you miss your chance to enroll for Medicare, you will generally have to wait until the General Enrollment Period for Medicare A and B. The General Enrollment Period runs from January 1 to March 31. This is the time period for anyone who missed their initial enrollment period or whose Medicare has cancelled. When you enroll into Medicare during this time your coverage will begin July 1 of that year. In some instances, you may have a good reason that you missed enrolling into Medicare (serious illness, death of a spouse, sever fire or damage to living residence, ect.). If this is the case, you may be able to file form SSA-561. You can call social security and ask if this may apply for you. If you qualify it may be possible for Social Security to enroll you into Part B without having to wait until the general enrollment period.