When Does The Medicare Part B Penalty Apply
The Medicare Part B penalty applies when you delay Medicare Part B benefits without creditable coverage.
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The video below shows Bob who chose to delay his Medicare Part B enrollment. Shortly after Bob retired at 65, his wife fell ill. Due to her medical costs, Bob decided to delay his Medicare Part B coverage in order to help pay their medical bills. Little did he know, the longer he waited to enroll in Medicare Part B coverage, the more his Medicare Part B late enrollment penalty grew. Watch the video to see how things turn out for Bob.
It Mostly Depends On How Long You Plan To Be Abroad
In this weeks column, Phil Moeller, the author of Get Whats Yours for Medicare: Maximize Your Coverage, Minimize Your Costs and co-author of the updated edition of How to Get Whats Yours: The Revised Secrets to Maxing Out Your Social Security, offers advice on Medicare Part B to a couple of retirees spending their post career living abroad.
Depending on how long you plan on living abroad, you may have to choose between incurring a penalty for every year you refuse Medicare Part B or paying for Part B without being able to use it.
Medicare Penalties For Not Enrolling
Before you decide to postpone enrollment in any part of Medicare, its important to understand the late enrollment penalties and limitations that can apply in the future.
Medicare Late Enrollment Penalties
- Part A
- If you have to buy Part A and you don’t sign up when you’re first eligible for Medicare, your monthly premium can increase by 10 percent. You’ll owe this higher premium for twice the number of years that you didn’t sign up.
- Part B
- The Part B late enrollment penalty increases your monthly premium up to 10 percent for each 12-month period you could’ve had Part B but didn’t sign up. In most cases, you’re required to pay this penalty for as long as you have Part B.
- Part D
- Medicare calculates the Part D penalty by multiplying 1 percent of the national base beneficiary premium $33.37 in 2022 by the number of full months you didn’t have Part D or creditable coverage. You will pay the penalty as long as you have Medicare drug coverage.
Typically, you can avoid penalties if you delay enrollment because you are still working and receive creditable health insurance from an employer health plan.
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What Are The Risks Of Enrolling Late In Medicare Part B
Remember that if you do not enroll in Medicare Part B during your Special Enrollment Period, youll have to wait until the next General Enrollment Period, which happens from January 1 to March 31 each year. You may then have to pay a late-enrollment penalty for Medicare Part B because you could have had Part B and did not enroll. If you owe a late-enrollment penalty, youll pay a additional 10% on your premium for every 12-month period that you were eligible for Medicare Part B but didnt sign up for it. You may have to pay this higher premium for as long as youre enrolled in Medicare.
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What Are Some Of The Reasons People Dont Enroll In Medicare
Two common reasons people may decide they dont want to become Medicare beneficiaries include:
- They have existing health insurancePeople who have other health care insurance may decide it provides adequate coverage without also having Medicare. However, Medicare can work with additional health insurance to save you money, so its usually worth enrolling anyway. Some retiree plans also wont cover costs for people eligible for Medicare who arent registered.
- They dont want to pay the premiumsWhile most people receive premium-free Medicare Part A , some people are required to pay a monthly Part A premium. Medicare Part B is optional but requires a monthly premium. Some people may decide theyd rather avoid these payments, though it could mean theyll pay extra for their Medicare coverage later when they eventually sign up.
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How Do I Decline Medicare Part A
If you want to disenroll from Medicare Part A, you can fill out CMS form 1763 and mail it to your local Social Security Administration Office. Remember, disenrolling from Part A would require you to pay back all the money you may have received from Social Security, as well as any Medicare benefits paid.
When Are The Medicare Enrollment Deadlines
For people who are receiving or eligible to receive Social Security benefits, Social Security will send you instructions for signing up three months before the month you turn 65. People who are receiving Social Security benefits will not be charged for Part A which covers hospital visits and services. Part A also covers hospice and skilled-nursing services as well as some home health care.
Part B is similar to traditional health insurance and comes with a base monthly premium that generally changes each year. Individuals who are considered high-income earners will pay more than the base rate depending on their annual income.
Folks who are living outside the United States or are traveling abroad should contact the closest Embassy or consulate to request enrollment forms.
The actual enrollment period for Original Medicare begins three months before you turn 65 and continues for an additional three months thereafter.
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Paying Into The System
People who qualify for Medicare have paid for that benefit. The number of years you or your spouse pay the federal government in payroll taxes determines not only your eligibility for the healthcare program but how much you will pay. These tax dollars are intended to safeguard entitlement benefits for you when you need them in the future.
What Do Medicare Parts A And B Cover
Part A, which in most cases is free, covers:
- Inpatient care in a hospital
- Skilled nursing facility care
- Nursing home care
- Home health care
In 2022, the deductible for Part A is $1,566.
Part B, which has a standard premium of $170.10 in 2022, covers medically necessary services and preventive services such as:
- Durable medical equipment
- Inpatient and outpatient mental health services
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I Didnt Sign Up For Part B When I First Became Eligible But Want To Sign Up Now I Know There Is A Penalty For Late Enrollment Is There Any Way To Avoid The Penalty
Generally, no. In most cases, if you missed your Part B enrollment window, which runs from the three months before the month of your 65th birthday through the three months after the month of your 65th birthday, you will face a late enrollment penalty once you do enroll, which will be added to your premium costs for the remainder of your enrollment. The penalty equals 10% of the standard monthly premium for each 12-month period that you delayed enrollment.
If you did not enroll for Part B during your initial enrollment period, you may qualify for a Special Enrollment Period to sign up for Part B anytime as long as you or a spouse is working and youre covered by a group health plan through that employment. For people age 65 or over who have coverage through a group health plan, there is also an 8-month SEP which starts the month after the employment ends or the group health plan coverage ends. If you sign up during an SEP, the late enrollment penalty will not apply.
Canceling Part B Because You Got A Job With Insurance
If you have had Part B for a while but no longer need it because youve rejoined the workforce with access to employer-sponsored health insurance, congratulations! But before you drop Part B, find out if your jobs coverage is primary or secondary to Medicare.
A primary payer health plan pays before Medicare. That means your employer-provided health plan will cover its share of your health care costs first, and if theres anything left over that Medicare covers, Medicare will pay what remains.
Conversely, a secondary payer health plan covers only costs left over after Medicare covers its share.
If your health plan at work is a primary payer, thats great. Feel free to drop your Part B coverage if you wish. The Part B premiums might not be worth any additional coverage you receive. But if you have secondary-payer insurance at work, its usually better to keep Part B, or you could get stuck paying Medicares share of your health care expenses.
Talk to your human resources department at work to find out if your employer-sponsored plan is primary or secondary to Medicare. Generally, businesses with 20 or fewer employees have secondary payer plans, while larger companies have primary payer plans.
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Sign Up: Within 8 Months After The Active Duty Service Member Retires
- Most people dont have to pay a premium for Part A . So, you might want to sign up for Part A when you turn 65, even if the active duty service member is still working.
- Youll pay a monthly premium for Part B , so you might want to wait to sign up for Part B.
Avoid the penalty & gap in coverageIf you miss this 8-month Special Enrollment Period, youll have to wait to sign up and go months without coverage. You might also pay a monthly penalty for as long as you have Part B. The penalty goes up the longer you wait to sign up. How much is the Part B late enrollment penalty?
Its Worth Asking Human Resources These Questions
If youre covered by a GHP and will be qualifying for Medicare soon, its worth your time to talk to Human Resources about transitioning to Medicare coverage. Heres what you should ask:
Josh Schultz has a strong background in Medicare and the Affordable Care Act. He managed a Medicare technical assistance contract at the Medicare Rights Center in New York City and represented clients in Medicare claims and appeals. Josh also helped implement federal and state health insurance exchanges at the technology firm hCentive. He has also held consulting roles, including an associate at Sachs Policy Group, where he worked with insurers, hospital, and technology clients.
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Why Would I Opt Out Of Medicare
Part B comes with a premium in most cases. Some people delay enrollment in Medicare Part B to avoid paying the premium â especially if they have other coverage. The same can be true of Part A, for people that must pay a premium for it.
If you delay enrollment in Part B or Part A, make sure you plan it well to avoid problems. For example:
- Group health plans may have different coverage rules if youâre eligible for Medicare coverage. Check with your plan and ask how it would work with and without Medicare.
- You might face a late enrollment penalty if you delay Part B and/or Part A coverage. To avoid a penalty, make sure you enroll in Medicare promptly when your employment ends, or when the group health coverage ends. After the month coverage or employment ends , you might have an 8-month Special Enrollment Period to enroll in Medicare without a penalty. Ask your benefits administrator, or contact Medicare.
Is It Mandatory To Sign Up For Medicare
While signing up for Medicare isnt technically required, there are serious financial penalties and consequences for delaying or forfeiting coverage.
Most people sign up for Medicare or are automatically enrolled in the program around their 65th birthday. This is known as your initial enrollment period, and it begins three months before you turn 65, includes your birth month and extends three months after that.
But what if you want to delay Medicare until later or refuse it completely?
If you are new to Medicare and receive group health insurance through your employer or your spouses employer and that employer has at least 20 employees you can delay Medicare enrollment without facing penalties.
You can voluntary disenroll from Medicare Part A and Part B by completing and mailing a form to the Social Security Administration.
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Can You Decline Medicare Coverage
Under federal law, a Medicare enrollee can voluntarily terminate Part B. You can also terminate Part A if you are required to pay a premium for coverage.
You must complete Form CMS-1763 and file a written request with the Social Security Administration to terminate your benefits.
The form takes about five minutes to complete, and you will be required to provide a reason for terminating coverage.
You will also be required to undergo an in-person or telephone interview with a Social Security Administration representative before your request is processed.
If you change your mind and decide you want to keep your Part A insurance, you can do so by filling out this form and mailing it to the Social Security Administration.
To find out more about how to terminate Medicare or to schedule a personal interview with the Social Security Administration, call 1-800-772-1213 or contact your nearest Social Security office.
How Medicare Advantage Can Save You Money On Your Part B Premiums
If you don’t qualify for the above programs, you still have options. Consider a Medicare Advantage plan that offers a rebate on your Part B premium. Here’s how that works:
A Medicare Advantage plan provides the same or better coverage than Part A and Part B . To receive this coverage, most enrollees pay a premium for their Medicare Advantage plan in addition to the cost of Part B.
But in some areas, typically large cities, Medicare Advantage providers offer $0 plans to better compete with other insurance companies. A few go even further and offer enrollees a rebate on their Part B premiums. If you enroll in one of these plans, you could pay a lower monthly Part B premiumand have more benefits, such as prescription drug, dental, vision, and hearing coverage.
These plans aren’t available in all areas, but even the average Medicare Advantage plan could help save you money. With most plans, you won’t have to pay an extra premium for prescription drug coverage or dental insurance, for example, which could free up some cash to cover the Part B premium.
To find out if a Medicare Advantage plan could save you money, give us a call.
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What Medicare Part B Will Pay For
For the most part, Medicare Part B will only help pay for the above services in certain situations. Medicares general rule is that it will only pay for things that it finds medically necessary.
Medicares general rule is that it will only pay for things that it finds medically necessary.Part B may only pay for some things if you have certain risk factors, or it might only help pay for a certain number of things in a given time period . Other services are offered every year.
The equipment and supplies must be bought through a certified Medicare supplier.
Some services are only covered in very specific situations. For example, Medicare Part B will pay for eyeglasses only if you need them after a specific type of cataract surgery.
How To Drop Part A & Part B
Generally, you can only drop Part A if you have to pay a premium for it, also called Premium-Part A. You can choose to drop Part B .
There are some risks to dropping coverage:
- Your costs for health care: You may have to pay all of the costs for services that Medicare covers, like hospital stays, doctors services, medical supplies, and preventive services.
- Gap in coverage: If you change your mind and want to sign up again later, you may have to wait until the next General Enrollment Period to sign up. Your coverage wont start until July 1.
- Late enrollment penalty: If you dont qualify for a Special Enrollment Period to get Medicare later, youll have to pay a monthly late enrollment penalty for as long as you have Part B coverage. The penalty goes up the longer you go without Part B coverage. If you have to pay a penalty for Part A, youll pay it for twice as long as you go without Part A coverage.
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Is There A Cap On The Medicare Part B Penalty
As of now, there is no cap when calculating the Medicare Part B late enrollment penalty. However, legislation has been introduced to cap the Medicare Part B penalty at 15% of the current premium, regardless of how many 12-month periods the beneficiary goes without coverage.
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As of now, all legislation to reduce the penalty is under review and has not been passed. However, it would save thousands of beneficiaries from the high cost of the Medicare Part B penalty.
What Is Medicare Part B
Medicare Part B helps cover medical services like doctors’ services, outpatient care, and other medical services that Part A doesn’t cover. Part B is optional. Part B helps pay for covered medical services and items when they are medically necessary. Part B also covers some preventive services like exams, lab tests, and screening shots to help prevent, find, or manage a medical problem.
Cost: If you have Part B, you pay a Part B premium each month. Most people will pay the standard premium amount. Social Security will contact some people who have to pay more depending on their income. If you don’t sign up for Part B when you are first eligible, you may have to pay a late enrollment penalty.
For more information about enrolling in Medicare, look in your copy of the “Medicare & You” handbook, call Social Security at 1-800-772-1213, or visit your local Social Security office. If you get benefits from the Railroad Retirement Board , call your local RRB office or 1-800-808-0772.Learn More:
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