If you don’t sign up for Medicare when you first become eligible, you may have to pay a late enrollment penalty if you do eventually enroll.
This guide will help you learn more about the late enrollment penalties that can be associated with each part of Medicare and how to avoid them.
When you first become eligible for Medicare, you have an Initial Enrollment Period. This is a seven-month period that begins three months before you turn 65 years old, includes the month of your birthday, and then continues for three more months thereafter.
If you wait too long after your Initial Enrollment Period to sign up for Medicare Part A (hospital insurance), Part B (medical insurance) or Part D (Medicare prescription drug plans), you could be subject to a Medicare late enrollment penalty.
Most people are eligible for premium-free Medicare Part A. If you qualify, you are not subject to Medicare Part A late enrollment penalties.
People who must pay a premium for Medicare Part A may have to pay a late enrollment penalty if they don’t sign up when they are first eligible but decide they want it later. There are special circumstances that could exempt beneficiaries from a penalty.
The Medicare Part A late enrollment penalty is 10 percent of the Part A premium, which must be paid for twice the number of years for which you were eligible for Part A but did not sign up. For example, if you were eligible for Part A for two years before finally signing up, you would have to pay the extra 10 percent penalty for four years.
In 2019, Medicare Part A premiums are either $240 or $437 per month, depending on the amount of Medicare taxes you paid during your lifetime. The 2019 Part A late enrollment penalty can be as high as $24 or $43.70 per month, depending on your Medicare Part A premium cost.
Medicare Part B is optional, but you could face a late enrollment penalty if you do not sign up for it when you are first eligible and don’t qualify for special enrollment.
The Part B late enrollment penalty is as much as 10 percent of the Part B premium for each 12-month period that you were eligible to enroll but did not.
For example, if you waited three years after your Initial Enrollment Period to sign up for Medicare Part B, your late enrollment penalty could be 30 percent of the Part B premium. And making matters worse, you will continue to owe this penalty for as long as you remain enrolled in Medicare Part B.
In 2019, the standard premium for Part B is $135.50 per month. If you owe the standard Medicare Part B premium but sign up for Part B a year after you were initially eligible, the late enrollment fee can add another $13.55 per month to your Part B premium.
There is no late enrollment penalty for Medicare Part C (Medicare Advantage plans). However, you may only sign up for a Medicare Advantage plan at certain times of the year.
Learn more about when you can sign up for a Medicare Advantage plan, such as during the annual Medicare Open Enrollment Period which runs from October 15 to December 7 each year.
For most people, the Medicare Part D Initial Enrollment Period is the same period of time as their Medicare Initial Enrollment Period.
If you go 63 consecutive days without “creditable drug coverage” after your Initial Enrollment Period is over, you could face a Part D late enrollment penalty if you eventually choose to sign up for a plan.
Creditable drug coverage can include:
The Part D late enrollment fee is calculated by multiplying 1 percent of the “national base beneficiary premium” (which is $33.19 in 2019) by the number of months you were eligible for but did not enroll in a Part D plan or other creditable coverage.
The amount is then rounded to the nearest 10 cents and added to your premium.
Medicare Part D plans are sold by private insurance companies, so the cost of a premium can vary from one plan to the next.
The Part D late enrollment penalty is waived if you qualify for Medicare Extra Help.
Medicare Supplement Insurance does not have any late enrollment penalties. However, there’s a good reason to sign up for a Medigap policy when you’re first eligible.
During your Medigap Open Enrollment Period (which is a six-month period that begins the day you are 65 years old and enrolled in Medicare Part B), insurance companies are not allowed to use medical underwriting to determine your Medigap plan rates.
If you apply for a Medigap plan after your Medigap Open Enrollment Period, insurance companies can use your health to determine your plan premiums. They could even potentially deny you coverage altogether.
Although there is technically not a late enrollment penalty for Medigap, it’s easy to see how enrolling in a Medigap plan as soon as you are eligible can be beneficial.
The easiest way to avoid a Medicare late enrollment penalty is to sign up for the coverage you want when you first become eligible. You may also avoid a Medicare late enrollment penalty if you qualify for a Special Enrollment Period.
A Medicare Special Enrollment Period is an extra enrollment period that may be granted to beneficiaries under certain circumstances. During this period, you are exempt from late enrollment periods.
Special Enrollment Periods may be granted for a range of circumstances such as losing employer health coverage, residing in a skilled nursing facility, moving to a new address and other situations.
For more information and to compare Medicare Advantage plans that may be available where you live, speak with a licensed insurance agent by calling TTY Users: 711 24 hours a day, 7 days a week.