Enrolling in Medicare and selecting your healthcare plan is a big decision. While it is important to weigh all your options, failure to get coverage on time could cost you. Here’s what you need to know in order to avoid Medicare late enrollment penalties.
You can face late enrollment penalties for Medicare Part A, Part B, and Part D if you fail to enroll for Medicare during the Initial Enrollment Period (IEP) and don’t qualify for a Special Enrollment Period (SEP).
Medicare Initial Enrollment Period (IEP)
The IEP spans seven months total:
- 3 full months before your 65th birthday
- The entire month in which you turn 65
- 3 full months after your birthday month
For example, if your 65th birthday is on June 9th, your IEP would begin on March 1st and end on September 30th.
Medicare Special Enrollment Periods (SEP)
If you miss the IEP, you’re eligible to enroll for coverage typically without penalties if you qualify for an SEP. Certain events make people eligible for coverage during an SEP, including:
- Working past 65 and covered by an employer
- Moving outside of current plan coverage area
- Losing current coverage
- An opportunity to get other coverage
- A plan changes its contract with Medicare
- Additional special circumstances
There is an eight-month period to sign up for Medicare coverage during a SEP which starts the month after a life event, or the month after group health plan insurance based on current employment ends (whichever comes first).
Medicare Late Enrollment Penalties
If you happen to forget to sign up for Medicare during the IEP or SEP, these are the late enrollment penalties you will face:
Part A late enrollment penalty
People who don’t qualify for premium-free Part A and don’t buy it during the SEP will see a penalty of 10% of the monthly premium. This penalty applies regardless of the length of time of delay, and you’ll have to pay the higher premium for twice the number of years that you didn’t sign up. For example, if you were eligible for Part A for three years but didn’t sign up, you’ll have to pay the higher premium for six years.
Part B late enrollment penalty
If you miss the initial enrollment period for Part B and aren’t eligible for premium-free coverage, your monthly premium could increase by 10% for each 12-month period you were eligible but didn’t enroll. And most likely, you’ll continue to pay this penalty each month for as long as you have Part B coverage. So, if your Initial Enrollment Period ended in December 2022 and you delayed signing up for Part B until March 2024, your Part B premium penalty would amount to 20% of the standard premium.
Part D late enrollment penalty
The cost of the Part D late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage. Creditable drug coverage includes drug coverage from a current or former employer or union, the Department of Veterans Affairs, Indian Health Service, TRICARE, or individual health insurance coverage. Going 63 days or more without any drug coverage means you’ll have to pay a penalty if you sign up for Medicare drug coverage at a later point.
The cost of the late enrollment penalty is calculated by multiplying 1% of the national base beneficiary premium ($34.70 in 2024) times the number of full, uncovered months you didn’t have Part D coverage. The final amount is rounded to the nearest $.10 and added to your monthly premium.
Key Takeaway
The cumulative penalties for Part A, Part B, and Part D can add up to a lot of money. If you don’t want to avoid Medicare late enrollment penalties, but are having trouble determining which plan is right for you, connect with us. We’ll help you find the Medicare plan that’s best for your healthcare needs.
