by: Margie Johnson Ware, Aging and Health Specialist
For most people, realizing you have to pay a late enrollment penalty comes as a surprise. You may have delayed enrolling in Medicare because you were still working or thought you would be automatically enrolled when you turned 65. Whatever the case may be, it leaves most people wondering “Why do I have to pay a late penalty?”
Medicare Penalties vary depending on the type of coverage you choose and how long you delayed enrolling. Let’s take a closer look at some of the additional cost associated with late enrollment and how you can avoid paying them.
You are considered a late enrollee in Original Medicare (Part A and B) if you are eligible to enroll but do not, either during your Initial Enrollment Period (IEP) or a Special Enrollment Period (SEP). If you delay enrolling in Medicare because you have employer coverage, you qualify for a SEP to enroll in Original Medicare or Part C. You have 8 months to enroll in Part A and B or 63 days to enroll in Part C or D after employer or union health coverage ends, or when the employment ends (whichever is first).
- Part A Penalty = 10% of Part A premium
- Period for Paying Part A = 2 x number of years you were eligible for Part A but did not enroll.
- Part B Penalty = Monthly premium + 10% for the number of years (or part of a year) you were eligible for Part B but did not enroll.
- Period for Paying Part B Penalty = As long as you have Medicare Part B Coverage.
To avoid being penalized for Part A and Part B determine when your enrollment period is and create a plan for when you will enroll. It’s important to remember that you can enroll in Medicare as early as 3 months before your 65th birthday and as late as 3 months after your birthday, to avoid penalties. You can also enroll in Medicare while you are covered under an employer’s plan.
PART D: PRESCRIPTION DRUG COVERAGE
Similar to Orginal Medicare, if you do not enroll in a Medicare Part D drug plan when you first become eligible for Medicare you will be required to pay a late penalty when you join. Generally, you are considered late if you do not join within 3 months of your effective Medicare Part A or Part B date.
- Part D Penalty = 1% of the average Part D premium (1% of $35.02 in 2018) x number of months you were late, rounded to the nearest 10 cents.
- Period for Paying Part D Penalty = As long as you have Medicare Prescription Drug Coverage.
You may be able to avoid a Part D penalty if:
- You are eligible for the Extra Help with Medicare costs, Or
- You qualify for a Special Enrollment Period (SEP) because you had creditable drug coverage when you turned 65
Also, keep in mind any future help complications you may have. While you are not required to enroll in Medicare Part D, the average older adult takes 5 or more medications per day so enrolling in Part D when you first become eligible may be the best decision.
It’s important to know when you should enroll in Medicare to avoid any additional cost. You can learn more about when you should enroll in Medicare on our Enrollment Period page or by contacting your local State Health Insurance Assistance Program (SHIP) for federally-funded Medicare counseling.