Medicare Late Enrollment Penalty

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When you sign up for Medicare after your initial enrollment period, oftentimes there will be a late enrollment penalty. This applies to any Medicare Part B as well as if you’re required to pay for Medicare Part A, if you did not enroll in the initial enrollment period. There may be a waiver of the penalty in some cases, so all is not necessarily lost at this stage. However, the longer you wait the more your penalty may be.

Part B late enrollment penalty

Part B must be started during your initial enrollment period (in most cases) or you will be hit with a late enrollment penalty. This penalty applies for the remainder of time that you are covered by Part B.

The penalty is 10% for each full 12 month period that you delay enrollment. For example, if your initial enrollment ended on September 30, 2018 and you wait until the annual period for 2020 (ending March 31, 2020), you will have a Part B premium penalty of 20%. Even though 30 months passed since the end of your initial enrollment period, only two 12-month periods passed, so the penalty is 20%.

This means that your Medicare Part B premium for 2020 would be 120% of the then-current “standard” Medicare Part B premium, which is $134 in 2018 (120% of $134 would be $160.80, an increase of $26.80 per month). Medicare premiums are increased annually for most enrollees.

The penalty stays with you for as long as you have Part B coverage – there is no way to eliminate or reduce the penalty. However, if you have had employer medical insurance (as an active employee, not a retiree) during the period from your initial enrollment period, you may not have the penalty applied. This is true if your employer plan covers 20 or more employees and is considered “creditable” coverage.

Part D late enrollment penalty

As with other parts of Medicare, if you fail to enroll in Part D upon reaching age 65, there can be penalties. Specifically, if you don’t sign up during your initial enrollment period, or if you go 63 days or more without one of the following (meaning your drug coverage has lapsed):

• Medicare Part D
• Medicare Advantage (Medicare Part C)
• Another Medicare health plan to provide the same coverage as Part D
• Creditable prescription drug coverage – such as through your employer or union. To be considered creditable, the coverage must pay at least as much as the standard Medicare Part D plan.

The penalty for late enrollment or lapsed enrollment is 1% per full month that you’ve gone without coverage since your initial enrollment period or the policy has lapsed, times the national base beneficiary premium, which is $35.02 in 2018. The penalty applies for the remainder of your life while you have Medicare Part D coverage.

So if you went for 6 months without Part D coverage, your premium penalty would be calculated as 6 months times 1% times $35.02 – for a penalty amount of $2.10. This late enrollment penalty amount will be added to your monthly Medicare Part D premium.

Part A late enrollment penalty

In some cases, you may not be eligible for free Medicare Part A coverage when you reach age 65 – such as, if you have not earned the requisite 10 years of covered employment. If you find that you’re not eligible for the free Part A Medicare coverage and you want this coverage, you will pay a premium for Part A. However, if you delay signup until some time after your initial enrollment period, you will be subject to a late enrollment penalty.

This penalty is in the form of a premium increase of 10%, and it lasts for twice the number of years that you were eligible but did not sign up. So if you waited two years to sign up for paid Part A of Medicare, you’ll have to pay a premium that is 10% higher for four years. After 4 years your premium will revert to the non-penalty level. Of course, if you meet the 10 credit year limit during the time you’re paying for Part A, you will no longer have to pay a premium for Medicare Part A, even if you signed up late.

The penalty may be waived in the same manner as with the Part B premium late enrollment penalty – if you were covered by creditable employer insurance as an employee, the penalty may be waived. Discuss this with your benefits department – some employer plans do not meet the requirements to delay filing without penalty. In addition, many employer plans require that you file for Part A & B when eligible and thus operate as a supplemental plan to Medicare. However, many plans are allowed to step in the place of Medicare, allowing you to delay enrollment without penalty.

The waiver can also apply for a spouse who is covered by the other spouse’s employer plan, as long as the employer plan is creditable coverage.

Nearly all retiree coverage requires the member to enroll in Part A & B and then the retiree coverage operates as a supplemental to Medicare. At any rate, retiree coverage does not meet the requirement to be creditable coverage, and so if your only other insurance coverage was retiree medical insurance and you delayed filing for Medicare, you will still be assessed the penalty.