How to Avoid Medicare Late Enrollment Penalties

Enrolling for Medicare and making the right plan selection is a big decision. While it is important to weigh all your options, failure to get coverage on time can lead to penalties that increase Medicare costs over time. Medicare late enrollment penalties can catch people off guard, which is why you should be aware of how to avoid these costly premium penalties.

Medicare has four parts, but not all of them have late enrollment penalties. A person can face late enrollment penalties for Medicare Part A, Part B, and Part D if they fail to enroll for Medicare during the Initial Enrollment Period (IEP) and don’t qualify for a Special Enrollment Period (SEP).

Medicare IEP

The IEP spans seven months total: three full months before your 65th birthday, the entire month in which you turn 65, and three full months after your birthday month. For example, if you’re 65th birthday is on June 9th, your IEP would begin on March 1st and end on September 30th.

Medicare 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).

If you happen to forget to sign up 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 don’t sign up for Part B when you’re first eligible and don’t qualify for premium-free Part B, your premium may go up 10% for each 12-month period you could’ve had Part B, but didn’t enroll. This penalty increases the longer you go without Part B coverage. In most cases, you have to pay the penalty every month for as long as you have Part B. For example, if your IEP ended December 2016, and you waited to sign up for Part B until March 2019, your Part B premium penalty would be 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 ($33.06 in 2021) 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.

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 pay penalties by missing Medicare deadlines, but are having trouble determining which plan is right for you, connect with one of our agents by visiting Medicare Insurance Advisors.