This post explains late enrollment penalties for Medicare Part B, Part D, and Part A, and provides examples of how the penalties are calculated.

Medicare Late Enrollment Penalties

Because our government wants all of us covered with health insurance, they impose late penalties for those who don’t enroll in Medicare when eligible. If there were no late penalties, then some people would just wait until they get very sick or have a bad diagnosis to sign up. An insurance program can’t work that way—monthly premiums from healthy people are used to pay for the treatments less healthy people need.

Who is paying late enrollment penalties with Medicare?

Sometimes people are uninformed and not aware they need to sign up for Medicare. Sometimes people make a conscious decision not to sign up because they can’t afford the premiums, but Medicare will never cost less than it does today. The prices go up every year, and the late enrollment penalty is accumulating with each year too.

Sometimes people have group health insurance and assume that they don’t need to sign up for Medicare, but not all group health insurance is considered an excused absence by Medicare. We call that “creditable coverage.” If you are 65 or older, you must have creditable coverage for Medicare to waive late enrollment penalties. Please watch the video on group health insurance if that might apply to you.

The two most common times that people enroll Medicare are

  • when turning 65 years old.
  • when losing group health insurance.

Medicare late enrollment penalties come in two forms:

  • a financial penalty that usually lasts the rest of your life.
  • a delayed start date, which means you will need to wait many months for the insurance to start.

We’ll go over enrollment dates and penalty calculations for Part B, Part D, and Part A.

Important: Those who are under age 65 and are on Medicare due to a disability will have late penalties waived once they turn 65!

Part B

Turning 65

You should enroll in Medicare within three months of turning 65. To review the Initial Enrollment Period when you’re supposed to sign up, we’ll use my birthday of January 24 as an example. I should enroll in October, November, or December, before my 65th birthday in January. If I don’t, I’ve got January, February, March and April to enroll without incurring a late penalty (though each of these options will result in a delayed start date).

If May comes and I haven’t enrolled, I’m late. Late enrollees must wait until the General Enrollment Period every January 1 through March 31 to enroll in Medicare Parts A and B. Those who sign up during this time will have an effective date of July 1. Since I have a January birthday, my seven-month enrollment window goes from October through April. If I miss that  Initial Enrollment Period, the earliest I will be able to start Medicare will be July 1, a full 18 months later, when I will be 66 ½.

Leaving Employer or Losing Group Health Insurance

The other most common time for people to enroll in Medicare is after they leave their employer or lose their group health coverage. Sometimes these events happen very close together, like maybe March 15 is your last day of work and your insurance expires on March 31. Other times, these events occur farther apart. For example, some people may retire and then have group health insurance for many months or even a year afterwards. Other people might switch from full time employment to part time and lose their medical coverage, but they continue working for the employer.

Whichever event happens FIRST (leaving employer or losing group health insurance), you have eight months from that first event to enroll in Medicare without getting a late enrollment penalty. If you’re uncertain about how all that will work in your situation, feel free to book an appointment with me and we can figure out the best time for you to sign up for Part B.

Part B Late Calculation – 2022

Most people pay a monthly Part B premium of $170.10 in 2022. (More for those with high income.)

The late penalty is 10% of premium amount for every 12-month period late.

The penalty will be charged for the rest of your life.

Example #1

15 months late:

15 months late is one 12-month period, so 10% penalty

10% x $170.10 = $17.01 penalty

It is usually paid monthly for life, but the amount will adjust each year as the Part B premium increases.

Example #2

51 months late:

51 months late is four 12-month periods, so 40% penalty.

40% x $170.10 = $68.04 penalty

It is usually paid monthly for life, but the amount will adjust each year as the Part B premium increases.

Part D

There are also late enrollment penalties associated with Part D—your Prescription Drug Plan. Anyone with either Part A or Part B is eligible to enroll in Part D.

A Part D late penalty is imposed whenever you go 63 days or more without “creditable drug coverage.” If you have insurance that includes prescription drugs, contact them to ask if it is creditable coverage for Medicare Part D. If not, you should buy a Prescription Drug Plan as soon as possible.

Part D Late Calculation – 2022

National average base premium amount   X  1%  X  number of months late

For 2022, the national average base premium amount is $33.37.

For high income people paying IRMAA for Part D, the penalty is added onto IRMAA.

Example #1

15 months late:

$33.37  X  1%  X 15 = $5.00

Rounded up to the nearest 10 cents

$5 late penalty

Penalty payable monthly for life except for those with Extra Help.

Example #2

51 months late:

$33.37  X  1%  X 51 = $17.02

Rounded up to the nearest 10 cents

$17.10 late penalty

Penalty payable monthly for life except for those with Extra Help.

Enrolling in Part D If You’re Late

If you miss your election period for Part D, they won’t just let you sign up whenever you get around to it. You’ll need to wait until the Annual Election Period, which is each fall between October 15 and December 7. That is the time each year you can change your drug plan and it will go into effect on January 1.

Part A

Most people don’t pay a premium at all for their Part A coverage because either they or their spouse worked for at least 10 years and paid into the Medicare system. Some people do have to pay a Part A premium, though, and those who enroll late will be charged extra on top of the premium that they owe.

Part A Late Calculation

The late penalty is 10% of premium amount for every 12-month period late.

The penalty will be charged for twice the number of years late.

Example #1

15 months late:

15 months late is one 12-month period

10% penalty for two years

Example #2

51 months late:

51 months late is four 12-month periods

40% penalty for eight years

Options For Those Who Can’t Afford Penalties

If you can’t afford to pay for your Medicare premiums plus the late enrollment penalties, what can you do?

Apply for Medicaid through your state. Some states have spend-down clauses where they will reduce your income by the amount of money you spend on health care. Other states may have other ways to help you qualify for Medicaid. Those who qualify for Medicaid are automatically enrolled in Extra Help for prescriptions.

Apply for Extra Help. If you have expensive prescriptions or can’t afford your part D premium, apply for the Extra Help program through Medicare. Some who do not qualify for Medicaid will qualify for Extra Help. If you do qualify for Extra Help, then your part D penalty costs will be waived.

Tell your family. If you have a big health event and you are not enrolled in all the parts of Medicare, your family will be concerned about that. It’s possible that some family members would be able to pitch in a little bit of money each month to help you pay your premiums.

Spread the word that not signing up for Medicare when first eligible can get costly. The best way to deal with late penalties is to enroll on time and avoid them.

Help is free!

I’m Laraine Sookhoo and I’m passionate about helping you understand your Medicare options so you can get the most out of your Medicare benefits. My help is free, so book an appointment to get started!

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