Medicare Part A
Most people eligible for Medicare are entitled to Part A, for free. This is because you or your spouse already paid the Medicare tax when you were still working. (This is the FICA deduction on your paycheck.) If you did not previously work, or did not work long enough, you can still get Part A but you may have to pay a premium.
If you did not get automatically enrolled or sign up during your Initial Enrollment Period, you will have a “late” penalty premium for Part A when you do sign up later on.
Note: The enrollment periods and premium penalties are the same whether you are entitled to Medicare Part A or can voluntarily buy Medicare Part A.
The penalty premium is 10% of the current Part A premium. You will continue to pay the penalty premium for twice the number of years you were eligible for Part A but did not enroll.
Medicare Part B
If you sign up late for Medicare Part B, you will have to pay a “late” penalty premium every month, along with your Part B premium. Your monthly Part B premium will go up 10% for each full 12-month period that you could have had Medicare Part B but did not take it. You will pay this higher premium as long as you have Medicare Part B.
Note: You may not have to pay the penalty if you had health insurance through your job or your spouse's job when you were first eligible to sign up for Medicare Part B. Contact Social Security to find out, or get personal help.
Medicare Part D
There is also a “late” penalty premium for not joining a Medicare Part D drug plan when you first become eligible for Medicare. Generally, you are late if you did not join within three months after you first got Medicare Part A or Part B.
You do not have to pay the penalty if you are eligible for the Extra Help with costs.
You may not have to pay the penalty if you had other drug coverage at the time through:
- Your job or your spouse's job, OR
- Retiree coverage, OR
- The Veterans Administration.
The penalty premium is added onto the regular premium that you pay to your Medicare drug plan. The fee is calculated as 1% of the average monthly prescription drug premium (1% of $32.42 in 2014, or 32 cents) times the number of months you were late, rounded to the nearest 10 cents.
For example, if you were 12 months late on enrolling in Part D, you would have to pay a fee of $3.70 (31 cents multiplied by 12 months is $3.72, rounded to nearest 10 cents is $3.70) every month in 2013, in addition to your Part D premium. You will pay this additional amount for as long as you have Medicare prescription drug coverage. This can get very expensive.
Note: In 2014, the average monthly prescription drug premium is $32.42. Therefore, the penalty fee will be calculated as 1% of $32.42, or 32 cents, times the number of months you are late enrolling in Part D.