How Is The Part A Late Enrollment Penalty Calculated
If you do have to pay premiums for Part A, the late enrollment penalty is 10 percent of either $274 or $499, added to that monthly premium. But unlike Part B penalties, it doesnt last forever.
Instead, you will pay Part A penalties for twice the number of years that you could have paid premiums for Part A but didnt. For example, if you delayed enrollment for three years, you would pay penalties for six years.
So if you worked for fewer than 7½ years total, or 30 quarters, you would have to pay almost $50 more a month, 10 percent of $499, as your premium penalty in 2022. If you delayed your enrollment for three years and werent eligible for a special enrollment period, then you would have to pay the penalty for six years. Because Part A premiums usually rise each year, your penalty will generally rise each year, too.
What Is The Medicare Part D Premium Penalty
To avoid Medicare premium penalties, its important to know when your initial enrollment period begins. Your initial enrollment period for Medicare starts three months before you turn age 65 and ends three months after you turn 65. That means you have seven months, including your birthday month, to enroll penalty free. For example, if your birthday is in April, then your initial enrollment period runs from Jan. 1 through July 31.
From that point on, you cant go without prescription drug coverage for more than 63 days, or youll owe a penalty. The penalty is a lifetime surcharge on your Part D premiums once you enroll.
How Do I Get Medicare Part D
After youve done your research and chosen a plan, you have a few options to sign up:
- You can enroll on the Medicare Plan Finder or on the plans website.
- You can complete a paper enrollment form or call the plan directly for assistance.
- You can call Medicare at 1-800-MEDICARE TTY: 1-877-486-2048.
Don’t Miss: Who Is Eligible For Medicare Advantage Plans
What If I Don’t Agree With The Late Enrollment Penalty
You may be able to ask for a “reconsideration.” Your drug plan will send information about how to request a reconsideration.
Complete the form, and return it to the address or fax number listed on the form. You must do this within 60 days from the date on the letter telling you that you owe a late enrollment penalty. Also send any proof that supports your case, like a copy of your notice of creditable prescription drug coverage from an employer or union plan.
What If I Still Have Coverage Through An Employer
If youre still working when you turn 65 and have group health coverage through your employer, you may be able to delay Medicare enrollment without penalties. You may also be able to delay enrollment if youre covered under a spouses work plan.
With group health coverage, you may qualify for a Special Enrollment Period if your coverage ends. The SEP allows you to sign up for Medicare Part and B when certain events happen in your life, such as losing coverage or moving. Generally, the SEP lasts for eight months after your coverage ends.
Before making a final decision on your coverage, take time to explore and understand your options. Talk to your plan administrator to learn more about how it works with Medicare, the best time to enroll, and how you can avoid a penalty.
You May Like: How To Qualify For Oxygen With Medicare
Penalties For Not Signing Up For Medicare: Automatic Enrollment
If youâre already receiving Social Security benefits when you turn 65, youâre typically enrolled in Medicare automatically. That is â youâre enrolled in Original Medicare, Part A and Part B. If this is the case for you, you donât have to worry about a late enrollment penalty for Part A and Part B.
However, some people keep working past age 65 and delay receiving Social Security benefits. In that case, youâre not generally automatically enrolled in Medicare.
If you qualify for Medicare by disability, in most cases youâre automatically enrolled in Part A and Part B after 24 straight months of receiving Social Security disability benefits. See for more information.
Can I Avoid Penalties
There are some special circumstances in which you can sign up late for Medicare without paying penalties. After the initial enrollment period, you can sign up for optional programs during special enrollment periods.
If you or your spouse continued working past your 65th birthday and had health insurance through your employer, you wont have to pay a penalty for late enrollment in any of the Medicare programs.
Beginning the month after you end your employment, or when your group health plan insurance from that employment ends, you have an 8-month window to sign up for Medicare parts A and B without penalty.
COBRA and retiree health plans are not considered as coverage under current employment and do not qualify you for a special enrollment period or save you from late enrollment penalties.
You can also qualify for a special enrollment period for Medicare parts A and B and avoid late enrollment penalties if you were volunteering in a foreign country during your initial enrollment period.
Read Also: Is Medicare Better Than Medical
What Happens If You Lose Your Creditable Prescription Drug Coverage
If you retire or are laid off, or your spousal coverage ends, then your days of having creditable prescription drug coverage are numbered. However, youll have access to a special enrollment period to sign up for Medicare, including Part D, without penalty. This period lasts for two full months from when your coverage ends.
This special enrollment period will also apply when COBRA runs out if you enroll in COBRA and retain your former employers creditable coverage.
If your employers coverage changes and is no longer creditable, youll also have a two-month special enrollment period to sign up for Part D without penalty.
How To Avoid Paying Medicare Late Enrollment Penalties
Medicare late enrollment penalties can catch some people unaware. Sometimes people simply forget to enroll during their Initial Enrollment Period. Sometimes people opt to delay thinking they will qualify for a Special Enrollment Period because theyre still working past 65 but then end up not having creditable coverage or not qualifying for a Special Enrollment Period after all.
Because a person could face late enrollment penalties for Medicare Part A, Part B and Part D, its important to be aware of how to avoid these costly premium penalties. First though, lets quickly look at which parts of Medicare have late enrollment penalties.
Recommended Reading: How Much Do You Get From Medicare
D Prescription Drug Coverage
Late Enrollment Penalty
This penalty is added to your monthly Medicare prescription drug plan premium for as long as you have prescription drug coverage. It may also continue to increase or decrease year-over-year as the national base beneficiary premium changes.
How much is the penalty?
One percent of the national base beneficiary premium , times the number of full, uncovered months you didnt have Part D or creditable coverage.
Example
Its 2022: Jane Smith is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2019. Since Jane was without creditable prescription drug coverage for 31 months from June 2019December 2021, her penalty in 2022is 31% of $33.37 . Since the monthly penalty is always rounded to the nearest $0.10, she pays $10.34 each month in addition to her plans monthly premium.
Here’s the math:
.01 x 31 months = .31 penalty.31 × $33.37 = $10.34$10.34 rounded to the nearest $0.10 = $10.30$10.30 = Jane Smiths monthly late enrollment penalty for 2022
How Can I Avoid Late Enrollment Penalties
- Sign up during your IEP.
- Contact your current health insurance plan before you become eligible for Medicare if you are unsure about whether or not you qualify for a SEP.
- Enroll before your SEP ends.
- Even if you do not take prescription drugs when you become eligible for Medicare, consider enrolling in a low-cost drug plan to avoid having to pay late penalty fees later.
- Keep good records of your current health insurance notices of creditable coverage and any conversations you have with agents who offer you advice.
Also Check: Is Eliquis Covered Under Medicare
Late Enrollment Penalty With Part D
Prescription drug coverage is another vital part of healthcare insurance. You are not required to obtain this kind of coverage, but many professionals recommend getting it. Having insurance for both your current medications and your future ones and save you a lot of money. Also, if you choose not to enroll in Medicare Part D during your initial enrollment period, and try to register for it at a later point, you will be assessed a penalty.
The penalty for not enrolling in Medicare Part D during your initial enrollment period is also a penalty that is added to your monthly premium. This premium is determined by multiplying 1% of the national base premium by the number of uncovered months without coverage. In order to determine a persons penalty, the monthly premium they have is multiplied times 1% as well as times the number of months that coverage is delayed.
Late Enrollment Penalty With Part A
The penalty for late enrollment in Medicare Part A can be hefty. People who have paid Medicare taxes through their place of employment, as well as people who have worked for at least ten years, premium-free Part A coverage plans are available. Those who meet any of these requirements are automatically eligible. This includes the vast majority of Medicare beneficiaries, coming in at 99% of people who sign up. People who do not have enough work credits will need to pay a premium for Medicare Part A.
If you need to pay premiums for Medicare Part A, you need to enroll as soon as you are eligible for the coverage. If you do not, you can be subject to penalties. For people who delay their enrollment in Medicare Part A, here are how the penalties work. These penalties equal 10% of a persons Part A premiums. This 10% penalty can add up. The longer a person waits to get their Part A plan, the more severe the penalty is. People can estimate the penalties they will be paying by doubling the time they waited to get the policy. For people who waited three years to enroll in Medicare Part A, the Part A penalty would need to be paid each month for the next six years after signing up. This can get quite costly, quite quickly.
Recommended Reading: How Much Does Medicare Deduct From Social Security
What Parts Of Medicare Have Late Enrollment Penalties
A Medicare penalty is a fee that youre charged if you dont sign up for Medicare when youre eligible. For most people, this is around the time they turn 65 years old.
Even if youre healthy and dont feel the need to have Medicare, its important that you .
The parts of Medicare that charge a late enrollment fee are:
- Part A (inpatient hospital insurance
Medicare Part C doesnt have a late enrollment penalty. You can switch over to this type of plan during certain enrollment periods.
Medicare supplement insurance also does not have a set penalty. However, rates may go up drastically if you dont sign up when youre first eligible. Well discuss those details a bit later.
As with any health insurer, Medicare relies on people who arent sick to support the system, so that the costs for those who are very sick can be balanced out.
Charging late fees helps to reduce these costs overall and encourage people to enroll on time.
How And When To Sign Upand Save
Meredith Mangan is a senior editor for The Balance, focusing on insurance product reviews. She brings to the job 15 years of experience in finance, media, and financial markets. Prior to her editing career, Meredith was a licensed financial advisor and a licensed insurance agent in accident and health, variable, and life contracts. Meredith also spent five years as the managing editor for Money Crashers.
David J. Rubin is a fact checker for The Balance with more than 30 years in editing and publishing. The majority of his experience lies within the legal and financial spaces. At legal publisher Matthew Bender & Co./LexisNexis, he was a manager of R& D, programmer analyst, and senior copy editor.
When you turn 65, youre eligible to enroll in Medicare. Most people get Part A for free. However, Part B , Part D , and Medigap arent free.
If you or your spouse are covered under another plan, you may be wondering if you have to enroll, when you should, and which parts to enroll in. If you plan to enroll in Parts A and B , you may be wondering if and when you should get a Part D prescription drug plan, a Medigap policy, or if you should bundle your Medicare coverage in a Medicare Advantage plan .
Learn how Medicare late enrollment penalties work, which Medicare parts they apply to, and how to avoid paying them.
Recommended Reading: Does Medicare Cover Companion Care
Medigap Late Enrollment Penalty
Late enrollment for Medigap doesnt cause you to incur a penalty. However, in order to get the best rates for your Medigap plan, youll need to enroll during your open enrollment period.
This period starts on the first day of the month you turn 65 and lasts for 6 months from that date.
If you miss open enrollment, you may pay a much higher premium for Medigap. You may also be refused a Medigap plan after open enrollment ends if you have health problems.
If you wish to defer Medicare enrollment, you dont need to inform Medicare. Simply dont sign up when you become eligible.
To avoid penalties when you do decide to enroll, you should:
- have alternative during the time youre eligible for Medicare
- make sure to enroll during the 8-month period when your current coverage ends, known as a special enrollment period
If you decline Medicare coverage and never enroll, you wont receive Social Security benefits or Railroad Retirement Board benefits. Youll also need to return any payments youve already received through these programs.
Penalties For Not Signing Up For Medicare Part D
Medicare Part D takes care of your prescription drugs. Although you may not be on any prescriptions during your initial enrollment period, it is usually a good idea to enroll in Part D anyway. For starters, it offers you peace of mind. But also, just like parts A and B, you will face penalties for not signing up for Medicare Part D during your open enrollment window.
Specifically, Medicare law states that you will need to pay a penalty on your Part D premium if you go 63 days after your initial enrollment period without a qualifying prescription plan. Qualifying plans include Part D, a Medicare Advantage Plan, and outside prescription coverage that is at least as good as Medicare Part D .
The Part D penalty isnt quite as stiff as the others, but it will still add up over time because it is a lifelong penalty, just like the late enrollment fees for Part B.
If you enroll in Medicare Part D late, you will pay an extra fee on your premiums: 1% of the national base beneficiary premium times the number of months for which you deferred enrolling.
In 2019, the national base is just over $33. So, if you defer enrollment in Part D for 24 months, you would pay approximately an extra $7.92 in premiums every month.
Avoiding the Part D Penalty
If you have creditable coverage form an employer, union insurance plan or the VA, you do not need a Medicare part D plan and will not be penalized if you do decide to choose one later in life.
Enroll in Medicare as Soon as You Can
You May Like: Do Medicare Advantage Plans Cover Cataract Surgery
Do I Pay A Penalty If I Don’t Enroll In Medicare And Why
As with any group insurance plan, Medicare needs healthy people paying premiums to help offset the cost of covering people who need to use more of its benefits.
If everyone waited until they needed a plan to enroll, costs would skyrocket. So you can delay enrollment in Medicare Part B or in a Part D prescription drug planand delay the monthly premiumsbut you may pay a higher premium once you decide its time to enroll.
Heres an overview based on the various parts of Medicare coverage:
- If youre not eligible for premium-free Part A based on your work history, your monthly premium may increase if you dont purchase it when you are first eligible
- In most cases, if you dont sign up for Part B when youre first eligible, youll have to pay a penaltyand not just upon enrollment. Youll continue to pay that penalty for as long as youre enrolled in Medicare Part B
There are exceptions to the rule, however. If you or your spouse is still working and has healthcare coverage through an employer or other creditable source, such as an individual healthcare plan or a state-established healthcare plan,1 you can wait to sign up for Part B or Part D without paying a penalty.
But once your employer coverage is gone, the only way to avoid a penalty is to enroll in Part B during whats called a Special Election Period . Thats an 8-month period that begins when your employer coverage ends or you stop working, whichever comes first.
Medicare Part B Penalties
Many people manage to dodge the Part B premium payments because they already have an employers plan coverage from their workplace. These people are the ones who get a Special Enrollment Period, and this way, they wouldnt have to pay the Part B penalty.
Part Bs penalty is 10% added to your monthly premium, and you will have this for all the years you missed your eligibility period. The eligibility criteria for Part B is similar to Part A.
It is far better to enrol yourself during your eligibility period than pay 10% more of what you wouldve paid. Above all, you will have to keep paying this penalty for as long as you have part B coverage.
Also Check: Will Medicare Pay For Shingles Shots
