Is it fair to say you’re here because you have some concerns about Medicare’s late enrollment penalties?
If so, you’ve come to the right place.
In this article, we will
- Help you understand the different penalties under Medicare.
- Share some tips to help you avoid them.
What you need to know
- The penalties can be costly, leading to hundreds of dollars in extra premiums.
- The penalties can be applied to your monthly premiums for Medicare Part A, Part B and Part D.
- Watch out for the Part B penalty which lasts the duration of time you’re on Medicare.
- Penalties can be hard to reverse.
What does the government consider to be late enrollment?
Late enrollment refers to not enrolling when you first became eligible for Medicare (i.e., during the 7-month Initial Enrollment Period (IEP)). The late enrollment penalty will often kick in if you don’t have proper documentation showing you’ve had coverage after turning 65.
Part A Penalty
Remember, Medicare Part A covers inpatient care at hospitals and nursing facilities.
Part A is premium free for most people if they (or their spouse) paid Medicare taxes for at least 10 years while working. If you didn’t, you’ll have to pay for Part A.
Those who for whatever reason did not sign up for Part A during their IEP, the premium will be 10% higher and will remain so for two times the number of years they went without appropriate coverage.
For example, say Jerry waited 3 years after turning 65 to enroll. He will have an extra 10% added to his Part A premium that he’ll pay for 6 years (i.e., twice the number of years he failed to enroll).
Of course, if Jerry qualifies for no-premium Part A, he won’t have a penalty.
Part B Penalty
Remember, Medicare Part B covers outpatient care such as those provided in a doctors office.
The Part B penalty is the stiffest of all because of its lifetime consequence. If you got hit with a penalty for Part A, chances are you’ll also have one for Part B.
For Part B, individuals get 10% added to their premium for every 12 month period they go without coverage. This penalty lasts for as long as you have Medicare.
Using our example with Jerry. He will have an extra 30% in premiums to pay – 10% for each year he went without coverage.
Part D Penalty
This is the most common penalty our clients face.
With the Part D penalty, you get 1% added for every month you go without “creditable” prescription drug coverage. What this means is that you must have drug coverage that is equivalent to Medicare Part D.
Let’s keep using our friend Jerry. Say he also didn’t have prescription drug coverage during those 3 years. He will pay 36 percent more for his Part D premium – 1% for every month he went with coverage.
What can you do to make sure you don’t get hit with a penalty?
This first thing is simple, yet often overlooked…
You’ve got to READ the notices you get from Medicare, your employer, and your insurance carriers. If you don’t understand it, ask for help. But please, please don’t just throw it out.
For every single client who incurred a penalty, the majority had coverage through an employer and was sent a notice informing them of what action to take. By the time they called us, the deadline had passed.
The second thing is knowing what steps you (and your dependents) are required to take when you turn 65.
If you work for an employer with fewer than 20 employees, Medicare will most likely become your primary payer when you turn 65 (even if you’re the owner). Ask your benefit administrator about your next steps. I can’t tell you how many small business owners get hit with a penalty because they delayed signing up.
If you have coverage under a union plan, some of those plans will require you to enroll in Parts A and B when you turn 65 (even if you’re still working). Others might even require you enroll in their contracted Medicare Advantage plan. Know what you need to do to keep your hard earned benefits active through retirement.
Finally, don’t assume, talk to an expert.
Medicare can be complicated. Hell, even those of us who do this work get tripped up sometimes. Imagine the confusion for someone who isn’t familiar with how things work.
Do you now see why it’s so important to do what you can to avoid penalties? You don’t want to be the one paying hundreds – if not thousands – of dollars extra in Medicare premiums. That might be the money for a cruise or vacation you cannot take.