Medicare Late-Enrollment Penalties
This article was updated on: 10/21/2018
Certain parts of Medicare may have late-enrollment penalties if you don’t sign up when you’re first eligible. These Medicare late-enrollment penalties may apply if you delay enrollment for Medicare Part A, Part B, and/or Part D.
Usually, you’re first eligible for Original Medicare, Part A and Part B, when you turn 65. You’ll get an Initial Enrollment Period that starts three months before you turn 65, includes the month of your 65th birthday, and ends three months later. Some people are eligible for Medicare before age 65 if they receive disability benefits for more than two years or have amyotrophic lateral sclerosis or end-stage renal disease.
For Medicare Part D (prescription drug coverage), generally you’re first eligible to enroll when you have Medicare Part A and/or Part B, and you live in the service area of a Medicare Part D Prescription Drug Plan. Most of the time, your Initial Enrollment Period (IEP) for Medicare Part D will take place at the same time as your Initial Enrollment Period for Original Medicare Part A and Part B. Medicare Part D is optional, but a late-enrollment penalty may apply if you decide to get this coverage after your IEP.
Late-enrollment penalties may apply when you enroll in Medicare Part A, Part B, or Part D after your Initial Enrollment Period. However, there are some situations where you can delay enrollment without facing a Medicare late-enrollment penalty.
Medicare Part A late-enrollment penalty
Most people get Medicare Part A premium free, as long as they’ve worked at least 10 years (40 quarters) and paid Medicare taxes during that time. If you don’t have enough work history, however, you may have to pay a premium for Medicare Part A.
If you pay a premium for Medicare Part A, make sure you sign up when you’re first eligible or this amount could be higher. The Medicare Part A late-enrollment penalty is a 10% higher premium for twice the number of years that you were eligible, but didn’t sign up for Medicare Part A. For example, let’s say you were eligible for Medicare Part A, but didn’t enroll for two years. When you enroll in Medicare Part A, you’ll have to pay a higher premium for four years (or twice the number of years that you were eligible for Part A, but went without it).
You may not have to pay this late-enrollment penalty if you delayed enrollment because you had other health coverage, such as through your work or through your spouse’s employer. If you sign up during a Special Enrollment Period, you can avoid the Medicare Part A late-enrollment penalty.
Medicare Part B late-enrollment penalty
Unlike Medicare Part A, everyone pays a premium for Medicare Part B. Similarly, if you don’t sign up when you’re first eligible and don’t have other health insurance, you could face a Medicare late-enrollment penalty. The Medicare penalty for Part B late enrollment is a 10% higher premium for each full 12-month period that you were eligible, but didn’t enroll in Medicare Part B. For example, let’s say your Initial Enrollment Period ended January 15, 2016, but you waited until March 2018 during the General Enrollment Period to enroll. This period includes two full 12-month periods, so your Medicare Part B penalty would be 20% higher. Unlike Medicare Part A, you may have to pay this higher premium permanently for as long as you’re in Medicare.
If you delay Medicare Part B because you’re still working and have coverage through your employer or your spouse’s employer, you may not have to pay a Medicare late-enrollment penalty as long as you sign up during your Special Enrollment Period.
Medicare Part D late-enrollment penalty
The Medicare Part D late-enrollment penalty may apply if you don’t sign up when you’re first eligible and don’t have other creditable prescription drug coverage for 63 or more days in a row. Creditable prescription drug coverage is other drug coverage that’s expected to pay as much, on average, as standard Medicare Part D coverage. Because this coverage is optional, this Medicare penalty doesn’t apply unless and until you decide you want this coverage.
The Medicare Part D penalty works differently and will depend on how long you went without creditable prescription drug coverage. It’s calculated by multiplying 1% of the national base beneficiary premium ($35.02 in 2018) by the number of full months you were eligible for Medicare Part D, but didn’t join and didn’t have creditable prescription drug coverage. This number is rounded to the nearest $.10 and added to your Medicare Part D premium. You may have to pay this late-enrollment penalty for as long as you have Medicare Part D.
If qualify for the Extra Help (Low-Income Subsidy) program, you generally won’t have to pay a late-enrollment penalty for Medicare Part D.
To avoid the Medicare penalty, make sure your prescription coverage is creditable if you’re not enrolled in a Medicare Part D Prescription Drug Plan. Your plan should notify you every year whether your coverage is creditable.
Some people think they’re saving money by going without Medicare prescription drug coverage, particularly if they don’t take many medications. However, your costs may end up being higher in the long run if you get sick and need to pay the full cost for prescription drugs. Also, remember that your late-enrollment penalty increases the longer you wait to enroll.
You can get Medicare prescription drug coverage in either of two ways.
- Enroll in a stand-alone Medicare Part D Prescription Drug Plan.
- Enroll in Medicare Advantage Prescription Drug plan.
If you don’t have other, creditable prescription drug coverage, you might consider signing up for a basic, lower-cost Medicare Part D Prescription Drug Plan. I can help you find Medicare prescription coverage that may fit your current needs and budget and help you avoid the late-enrollment penalty in the future. If you’d like, you can use the links below to set up an appointment or have me email you some plan options. If you want to start looking at plans right now, the Compare Plans buttons will take you to our plan comparison page.