You may be charged with a late-enrollment penalty for certain Medicare plans such as Medicare Part A, Medicare Part B, and Medicare Part D plans, if you do not enroll when you are first eligible. This may increase the amount of out-of-pocket costs you pay for your coverage in Medicare. Medicare Part A is hospital insurance and Medicare Part B is medical insurance; these two parts make up Original Medicare. Original Medicare does not cover prescription drugs so Medicare Part D is offered as an optional prescription drug plan from private insurance companies approved by Medicare.
You become eligible for Medicare during your Medicare Initial Enrollment Period (IEP), a seven-month period in which you can sign up for coverage. IEP begins three months prior to your 65th birthday and ends seven months after the initial start date of your IEP. You are eligible for Medicare if you are 65 or older AND you are an U.S. citizen OR a permanent legal resident who has lived in the U.S. for at least five consecutive years. If you have end-stage renal disease that needs to be treated with dialysis or a kidney transplant or you have amyotrophic lateral sclerosis, often referred to as ALS or Lou Gehrig's disease, you may also be eligible for Medicare coverage.
Late Enrollment Penalty for Medicare Part A
Medicare Part A is hospital insurance that you receive premium-free if you or your spouse paid Medicare taxes for at least 10 years (or 40 quarters) while employed. If you are receiving Social Security or Railroad Retirement benefits when you turn 65 or qualify through disability, you will automatically receive coverage under Medicare Part A.
If you are not automatically enrolled in Medicare Part A or do not qualify to be exempt from premiums under Medicare Part A AND you fail to enroll in Medicare Part A when you are first eligible, you may be responsible for paying a 10% higher monthly premium for twice the number of years you were eligible but did not enroll in Part A. For example, if you did not enroll in Medicare Part A for three years from when you first became eligible and decide to enroll, you would pay a 10% higher monthly premium for six years. Medicare Part A premiums in 2018 are estimated to be as high as $422 without the penalty.
Late Enrollment Penalty for Medicare Part B
Medicare Part B is medical insurance typically used to cover outpatient services such as doctor visits. Depending on your circumstances, you may have to pay a late-enrollment penalty if you delay enrolling in Part B until after your Initial Enrollment Period (IEP) has ended. You may choose to delay enrollment in Medicare Part B if you are still working and are covered by your employer's insurance policy. This situation is a possible exemption from the late-enrollment penalty.
In other cases, you may have to pay a 10% higher premium for each full 12-month period that you went without Medicare Part B coverage after your IEP ended for the rest of the time you receive Medicare coverage. For example, if you did not enroll in Medicare Part B when your IEP ended (suppose it ended September 15th, 2017) but you later enroll in Part B during the Medicare General Enrollment Period, January 1- March 31, in 2019. In this case, you did not receive coverage for one full 12-month period so you would probably pay a 10% higher monthly premium for rest of the time you are enrolled in Medicare.
Late Enrollment Penalty for Medicare Part D
Medicare Part D is an optional prescription drug plan that has a late enrollment penalty that you must continue to pay as long as you are enrolled in Medicare Part D. If you do not have creditable prescription drug coverage for more than 63 days in a row after your IEP has ended, you may be responsible for paying a higher monthly premium under Medicare Part D. Creditable prescription drug coverage is defined as insurance coverage that is expected to cover, at minimum, the same amount on average as a standard Medicare prescription drug coverage plan.
You will pay a late enrollment penalty that is calculated by multiplying a 1% penalty rate of the national base beneficiary premium (subject to change from year to year) by the number of full months you delayed enrolling in Part D after your IEP has ended AND you went without credible prescription drug coverage. This number will be rounded to the nearest $0.10. The national base beneficiary premium was $35.02 in 2018. For example, if in 2018, you delayed enrollment in Part D for six months after your IEP ended, you would pay 1% of $35.02 multiplied by 6 months (0.01 X $35.02 X 6 months) which equals $2.10. You would pay $2.10 in addition to your monthly premium for Medicare Part D.
Need Help Finding a Medicare Plan to Avoid Late Enrollment Penalties?
For help finding a Medicare plan, try our Medicare Cost Revealer. If you have any questions, please contact Medicare at any time at 1-800-MEDICARE (1-800-633-4227; TTY users 1-877-486-2048).