Medicare is a federal health insurance program that can help with a lot of the costs related to healthcare. Despite the subsidy of premiums, there are costly (and avoidable) penalties for those who miss their enrollment period.
While you’re not required to sign up for Original Medicare (Part A and Part B), you must sign up or provide proof of creditable alternate insurance coverage. A Medicare penalty can increase the price of your monthly premium when you sign up outside of your enrollment period.
So, how much is the Medicare late enrollment penalty? Well, it depends on whether you’re dealing with Medicare Part A (hospital insurance), Part B (medical insurance) or Part D (prescription drug). We’ll go through each part’s potential penalties and how you can avoid them.
What Is a Medicare Late Enrollment Penalty?
Your Initial Enrollment Period (IEP) starts three months before you turn 65, includes your birthday month and ends three months after. If you sign up for Medicare outside this period, you’ll be charged a late enrollment penalty. Each part has its own penalties, and they can be steep if you delay signing up for Medicare. It’s important to remember that Medicare bills aren’t like utility or credit card bills. If you get a Medicare penalty, your monthly premium will increase by an extra amount for a length of time. Sometimes, these charges can last the entirety of your coverage.
Calculating a Medicare Penalty
Each Medicare part has a different policy about penalties. Medicare Part A, Part B and Part D are all subject to late enrollment penalties because these plans are required if you don’t have creditable coverage. Medicare Advantage (Part C) plans are Medicare-approved plans offered by private insurance companies that cover Medicare Part A and Part B. Because Part C plans aren’t required, there aren’t late enrollment penalties. Some Medicare Advantage (MA) plans also include Medicare Part D coverage (MAPD).
Let’s take a look at penalties for each plan:
- Medicare Part A penalty: If you pay a Part A premium, your penalty is an extra 10% of your monthly premium. The penalty is charged for double the number of years you delayed enrollment. For example, if you delay your enrollment by two years, you’ll be charged your penalty for four years.
- Medicare Part B penalty: Your penalty will be an extra 10% of your premium for each year you could’ve enrolled. If you missed your enrollment period by two years, you’ll have to pay your penalty for two years.
- Medicare Part D penalty: The Part D penalty is 1% of your monthly premium, and you’ll have to pay the penalty as long as you’re enrolled in Part D.
How to Avoid a Late Enrollment Penalty
You can avoid having to pay your Medicare penalty by making sure you sign up during your IEP. Plan ahead and set a reminder on your phone or mark your calendar three months before you turn 65. The earlier you take care of your enrollment, the better off you’ll be.
If you plan on sticking with an employer-sponsored insurance plan while eligible for Medicare coverage, get written proof of creditable coverage in place of Part B and Part D. To have creditable coverage means that your coverage is at least as good as what you would receive from Medicare Part B and Part D.
You don’t have to worry about paying a Medicare penalty if you take the time to plan ahead. Make a decision about whether or not you’re going to sign up for Medicare before you reach age 65, so you have a plan when your IEP opens three months before your birthday.
If you need help shopping or signing up for a Medicare Advantage plan, you can contact one of our experts at Wellcare to learn more about available options that fit your budget and needs. We’re always happy to help.
Late Enrollment Penalty Questions
What can a member do to avoid paying a late enrollment penalty?
The best thing you can do to avoid paying a late enrollment penalty is to sign up during your Initial Enrollment Period (IEP). If you choose to keep your employer-sponsored insurance coverage for a time, make sure to sign up during your Special Enrollment Period when you choose to drop that coverage.
When did the Medicare late enrollment penalty start?
The late enrollment penalty started in 2003 with the Medicare Prescription Drug, Improvement, and Modernization Act. It created Medicare Part C and Part D plans and the late enrollment penalty. How do I get rid of the Medicare Part D penalty? There are three situations where you can get rid of your Medicare Part D penalty.
- If you have Medicare and are under 65, the late enrollment penalty ends when you turn 65.
- You might have the penalty paid for you as part of a state pharmaceutical assistance program (SPAP).
- If you qualify for Extra Help, your penalty will be eliminated.
What happens if I refuse Medicare Part D?
While you can refuse Medicare Part D coverage, you could run into two problems. First, you won’t have any prescription drug coverage should you need it. Second, you’ll be subject to late penalties if you decide to sign up for a plan later. Is there a penalty for not enrolling in Medicare Part A at age 65? Yes, there is a penalty for not signing up for Medicare Part A at age 65. However, you won’t have to pay a monthly penalty if you qualify for premium-free Part A.
Which Medicare Advantage Plan is right for you?
Call us today to learn more and enroll.
8 a.m.-8 p.m., 7 days a week.