October 4, 2017
Medicare encourages beneficiaries to have Medicare coverage as soon as they are eligible. To this end, Medicare provides deterrents in the form of late enrollment penalties for delays in enrollment in Medicare Part A, Medicare Part B, and Medicare Part D: each has its own late enrollment penalty. Any Medicare late enrollment penalty could make your Medicare costs higher than the usual Medicare premium(s) for various time periods. Understanding each late enrollment penalty can help you understand the consequences of delaying enrollment in Medicare Part A, Part B, and/or Part D.
Medicare Part A
Most individuals who are eligible for Medicare are automatically enrolled in Part A (hospital insurance) and receive their Medicare card in the mail three months before their month of eligibility. However, if you are eligible for Medicare Part A, but were not automatically enrolled, you will need to enroll during the Initial Enrollment Period. Your Initial Enrollment Period lasts for seven months. The period begins three months before your month of eligibility and ends three months after. Your month of eligibility will either be the month you turn 65 or, if you are eligible due to a disability, the 25th month you receive disability benefits from the Social Security Administration or the Railroad Retirement Board.
Once this Initial Enrollment Period is over, you will have to wait until the next General Enrollment Period (January 1 through March 31) to enroll, and may have to pay the late enrollment penalty for Part A.
Most people eligible for Medicare are entitled to premium-free Medicare Part A. This is because you or your spouse already paid the Medicare tax (i.e., the FICA deduction from your salary). If you did not previously work or did not work long enough, you can still get Part A but you may have to pay a premium.
If you are not eligible for premium-free Medicare Part A and you delay enrollment in Part A, the late enrollment penalty may be added to your monthly Medicare Part A premium. The Part A late enrollment penalty may equal up to 10% of the monthly premium amount you must pay. For instance, if your monthly premium amount would have been $450 if you had enrolled during your Initial Enrollment Period, your late enrollment penalty will be an additional $45 per month. Your actual Medicare Part A premium will be $495 a month.
The length of your delay determines how long the late enrollment penalty will be added to your monthly premium. For every year you delay in enrolling in Part A, you will pay the Part A late enrollment penalty for two years. For instance, if you enroll two years after your Initial Enrollment Period is over, you will have the late enrollment penalty included in your premium for four years from the time you enroll in Medicare Part A.
In some cases, you can delay enrollment in Medicare Part A without having to pay a late enrollment penalty. If you are eligible for Medicare and have health insurance coverage from an employer or union sponsored group health plan, you may delay enrollment in Part A without a late enrollment penalty. If you lose coverage from the group health plan, you may be eligible for a Special Enrollment Period. If available, your Special Enrollment Period permits you an eight-month period to enroll in Medicare Part A, which begins the month after employment ends or the group health coverage ends, whichever happens first. You will not have to pay the late enrollment penalty if you qualify for this Special Enrollment Period (SEP). However, you may be subject to the Medicare Part A late enrollment penalty amount if you failed to enroll in Medicare Part A when you had the opportunity of the Special Enrollment Period.
Medicare Part B
In most cases if you sign up late for Medicare Part B, you will have to pay a late penalty premium every month for as long as you have Medicare Part B, along with your Part B premium. Your monthly Part B premium may increase 10% for each full 12-month period that you could have had Medicare Part B but did not enroll. For example, if your monthly Medicare Part B premium would have been $120 if you had signed up during your Initial Enrollment Period, every year you do not enroll will add another $12 late enrollment penalty onto your monthly cost. Wait two years and your late enrollment penalty will be an additional $24 per month, etc.
However, as with Medicare Part A, you may not have to pay the Part B penalty if you qualify for a Special Enrollment Period (SEP). You might qualify for a Special Enrollment Period if you had health insurance through your job or your spouse’s job when you were first eligible to sign up for Medicare Part B.
Medicare Part D
There is a late penalty premium for not enrolling in a Medicare plan that provides prescription drug coverage—either a stand-alone Medicare Part D Prescription Drug Plan or a Medicare Advantage Prescription Drug plan. Generally, you are late if you did not join within 3 months after your Medicare Part A or Part B becomes effective. The late enrollment penalty for Medicare Part D works differently than for Medicare Part A and B. You could incur the late enrollment penalty for Part D if you experience a continuous period of 63 days or more when you do not have either Part D coverage or creditable coverage after your Initial Enrollment Period. Creditable coverage means prescription drug coverage from an employer or union that provides benefits at least as good as Medicare’s standard prescription drug coverage.
The amount of the late enrollment penalty is calculated using 1% of the national base beneficiary premium ($35.02 in 2018) and the number of full months you were eligible for a Medicare Part D Prescription Drug Plan but didn’t enroll. Once calculated, this amount is added to your Medicare Part D monthly premium. Like the Medicare Part B late enrollment penalty, you may have this additional cost on your premium for as long as you have a Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan. It is also important to note that the national base beneficiary premium may increase each year, which means your late enrollment penalty may also increase each year.
You may not have to pay the penalty if you qualify for a Special Enrollment Period (SEP) because you had other drug coverage that is as good as Medicare (creditable coverage) at the time you turned 65. Examples of creditable coverage include:
- Coverage through your job or your spouse’s job, OR
- Retiree coverage, OR
- Coverage through the Veterans Administration.
The cost of paying the late enrollment penalty For Medicare Part A, Part B, and/or Part D can add up fast. If you want to keep your costs down, it’s important to enroll in Medicare Part A, Medicare Part B, and Medicare Part D in a timely manner to avoid incurring a late enrollment penalty.
If you have limited income and resources, your state may help you pay for Part A, and/or Part B. You may also qualify for Extra Help to pay for your Medicare prescription drug coverage.