Medicare charges late enrollment penalties that take some people by surprise. These penalties are designed to discourage older Americans from passing up Medicare coverage and possibly incurring high medical bills down the road. Take steps to avoid these penalties, so you do not have to pay higher Medicare premiums.
What Penalties Does Medicare Impose?
You end up paying more for Medicare if you enroll late in Part A (hospitalization), Part B (outpatient services), and Part D (prescription medications).
Part A: If you fail to sign up for Part A during your first enrollment period, Medicare increases your premium by 10%. You are charged this additional amount for twice the number of years you delayed enrollment. However, many people qualify for Part A with no premium. If you are eligible, you will not have to pay the penalty.
Part B: The penalty for late enrollment in Part B is 10%. However, that penalty is increased by 10% every 12 months after you become eligible to enroll. The penalty continues for as long as you remain in Part B. For example, if you wait two years after you become eligible to enroll in Part B, your premiums will be 20% higher for as long as you are on Medicare.
Part D: It pays to sign up for prescription drug coverage as soon as you become eligible. Suppose you do not have “creditable” drug coverage through Medicare or an employer for at least 63 days after the end of your initial enrollment period. In that case, you will end up paying the penalty. The penalty amount is calculated as 1% of the average Part D premium for every month you went without coverage. You pay the penalty for as long as you are enrolled in Part D.
What Can You Do to Avoid Medicare Penalties?
Initial Enrollment Period
The best way to avoid penalties is to sign up during your initial enrollment period. This is the seven-month period when you first become eligible for Medicare. It begins three months before you turn 65, includes the month you turn 65, and ends three months after you turn 65. You won’t pay any penalties if you enroll in Medicare during this period.
You may qualify for a special enrollment period if you have other “creditable” health insurance coverage. This coverage might be through your employer or spouse or a military health benefits program. Make sure the coverage you have is considered creditable for Part B and Part D.
If you qualify for special enrollment, you can sign up for Medicare without a penalty while you still have the other coverage or up to eight months after it ends for Parts A and B. However, you only have 63 days after your additional creditable coverage ends to enroll without a penalty for Part D.
If you need assistance enrolling in Medicare, our friendly agent is happy to help. We can advise you on how to avoid paying Medicare penalties.