Understanding the Medicare Late Enrollment Penalty
When learning about enrollment, it’s important to keep a few key things in mind when it comes to rules and risks. Medicare cost enough without additional penalty fees.
Medicare Part A penalty
Most people eligible for Medicare are entitled to Part A for free. This is because you or your spouse already paid the Medicare tax when you were still working. (This is the FICA deduction on your paycheck.) 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 did not get automatically enrolled or sign up during your Initial Enrollment Period, you will have a late penalty premium for Part A when you do sign up later on.
The enrollment periods and premium penalties are the same whether you are entitled to Medicare Part A or can voluntarily buy Medicare
The penalty premium is 10% of the current Part A premium. You will continue to pay the penalty premium for twice the number of years you were eligible for Part A but did not enroll.
Medicare Part B Penalty
If you sign up late for Medicare Part B, your monthly Part B premium will go up 10% for each full 12-month period that you could have had Medicare Part B but did not take it. You will pay this higher premium as long as you have Medicare Part B. Beware of taking Part B with COBRA, it is not considered “Credible Coverage” and will be difficult to enroll in a Supplemental plan without medical questions to be asked.
You may NOT have to pay the penalty if you qualify for a Special Enrollment Period. (SEP) You might qualify for an SEP 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. This excludes COBRA coverage.
IF YOU MISSED YOUR INITIAL ENROLLMENT YOU MAY ENROLL FOR PART B DURING THE OPEN ENROLLMENT PERIOD JANUARY 1ST THROUGH MARCH 31ST WITH AN EFFECTIVE DATE OF JULY 1ST.
Medicare Part D penalty
There is a late penalty premium for not joining a Medicare Part D drug plan when you first become eligible for Medicare. Generally, you are late if you did not join within 3 months after your Medicare Part A or Part B becomes effective.
You do not have to pay the penalty if you are eligible for the Extra Help with costs.
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 Or
- Medicaid or Extra Help coverage
The penalty premium is added onto the regular premium that you pay to your Medicare drug plan. The fee is calculated as 1% of the average monthly prescription drug premium (1% of $33.19 in 2019) times the number of months you were late, rounded to the nearest 10 cents. This penalty is permanent – you would have to pay it for as long as you have Medicare Prescription Drug Coverage.
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