There are four words that no Medicare beneficiary ever wants to hear: Medicare late enrollment penalty. Unfortunately, many enrollees are misinformed about the consequences of not signing up for Medicare when they are first eligible. This often results in them having to pay the dreaded Medicare penalty for late enrollment.
Why is there a late enrollment penalty for Medicare?
Just like with any health insurer, Medicare relies on the premiums of healthy beneficiaries to help cover expenses generated by sick or injured enrollees. Without the contribution of every potential Medicare beneficiary’s monthly premiums, programs like Medicare are unsustainable.
That’s why there are late enrollment penalty fees in place. These penalties encourage people to sign up for Medicare coverage when they are first eligible. Even though you may be healthy come time to enroll in Medicare, think of it as an investment towards a future full of medical uncertainty.
Medicare Late Enrollment Penalty Fees
Medicare Part A Late Enrollment Penalty
Most people qualify for premium-free Part A when they first become eligible for Medicare. However, some people have to pay a premium for Part A. This applies to you if you or your spouse didn’t pay Medicare taxes for the required amount of time.
In this case, you may choose to delay your Part A enrollment. However, be aware that doing so will result in you having to pay a late enrollment penalty fee. You will have to pay this for twice the number of years that you could have signed up for Part A but you didn’t.
If you must pay a premium for Part A and you don’t sign up when you are first eligible, your premium may go up 10%. For example, if you didn’t have premium Part A for three years during which you could have, you will have to pay a 10% higher premium for six years.
In 2021, your Part A premium can either be $259 (if you paid Medicare taxes for 30-39 quarters) or $471 (if you paid Medicare taxes for less than 30 quarters). Let’s say you have a $259 Part A premium, but you held off 3 years to enroll.
You would have to pay $284.90 every month (10% of $259+$259) for six years for your Part A premium. After that time, your monthly premium would return to $259.
Medicare Part B Late Enrollment Penalty
Unlike Part A, almost everyone must pay a monthly premium for Part B. In 2021, the standard Medicare Part B premium is $148.50. This amount increases incrementally for certain high income earners.
However, if you fail to enroll in Part B when you are first eligible, you will have to pay a late enrollment penalty fee. So what is the penalty for late enrollment in Medicare Part B? Your premium will go up 10% for every 12 month period you were eligible for Part B but weren’t enrolled.
So let’s say you signed up for Part B 30 months after you first became eligible. Your premium will go up 20%, given that you weren’t enrolled for two full 12 month periods.
Assuming that you pay the standard Part B premium of $148.50, you will have to pay a Part B premium of $178.20 (20% of $148.50+$148.50) for as long as you are enrolled in Medicare Part B.
There are certain circumstances that warrant a Special Enrollment Period, in which case you don’t have to pay a late enrollment penalty fee. Some examples are if you have coverage through your employer or spouse who is working, have retiree coverage, or have TRICARE or Veteran’s benefits.
If you think you may qualify for a Special Enrollment Period but aren’t sure, reach out to our licensed Medicare insurance agent here at Medicare Plans Direct. We can answer any questions you may have about your Medicare enrollment.
Medicare Part D Late Enrollment Penalty
The Medicare late enrollment penalty for Part D is perhaps the most common of the three Medicare penalty fees. Many Medicare beneficiaries aren’t aware that failing to sign up for drug coverage when they are first eligible could cost them in the future.
If there is any period of 63 days or more in a row during which you don’t have Part D drug coverage, you may be subject to the late enrollment penalty fee. The only exception to this is if you have some other form of creditable drug coverage instead.
You typically have to pay this penalty fee for as long as you have prescription drug coverage.
The Medicare Part D late enrollment penalty is calculated by multiplying 1% of the national base beneficiary premium, which is $33.06 in 2021, by the number of full months that you weren’t enrolled in Part D or some other creditable drug coverage plan. This amount is rounded to the nearest $0.10 and added to your monthly premium.
For example, let’s say you went without Part D or some other creditable drug coverage for exactly a year. To calculate your penalty fee, you have to multiply 1% of $33.06 ($0.33) by 12, which comes out to $3.96. The Part D late enrollment penalty fee is always rounded to the nearest $0.10, so you would have to pay an extra $4 per month on top of your normal Part D monthly premium.
How To Avoid Late Enrollment Penalty Fees
The best and simplest way to avoid a Medicare late enrollment penalty is by signing up during your Initial Enrollment Period. This is the period that begins three months before your 65th birthday, includes your birthday month, and extends for three months after.
Unless you have employer coverage or some other creditable coverage, you should enroll in all parts of Medicare when you are first eligible to avoid late enrollment penalty fees.
That’s why it’s so important to be informed about Medicare timelines well before you turn 65. Check out our Medicare enrollment page for more detailed information.
Otherwise, you should be sure that you have other creditable coverage if you don’t enroll in Medicare when you first have the chance. Additionally, pay close attention to when your other coverage ends. You will have to enroll in Medicare during your corresponding Special Enrollment Period to avoid the late enrollment penalty.
Extra Help and the Part D Late Enrollment Penalty
If you qualify or at some point become eligible for Extra Help, you won’t have to worry about paying a Part D late enrollment penalty.
However, if you lose your Extra Help eligibility later on, you may be responsible for paying that late enrollment penalty if you were without drug coverage for 63 or more consecutive days.
Part D Late Enrollment Penalty Appeals
If you don’t agree with your Part D late enrollment penalty, you have the right to request a reconsideration. You can get information on how to do so from your insurance company.
Your drug plan will provide you with a late enrollment penalty reconsideration request form. This form outlines the circumstances that warrant review for an appeal request.
However, we remind you that the best way to avoid having to pay a late enrollment penalty is by enrolling in all parts of Medicare when you first become eligible if you don’t have other creditable coverage.
If you have questions about any aspect of the Medicare late enrollment penalty, or would simply like to discuss your Medicare options with a licensed insurance agent, reach out today.