A question I get often is “What happens if I do not enroll when first eligible”. Every month, hundreds of thousands of Medicare beneficiaries pay late enrollment penalties for failing to enroll in Parts A or B or maintain creditable drug coverage. The top reason given is that they simply didn’t know that failing to enroll when they first became eligible would result in these lifelong penalties. There are also people who don’t realize that automatic enrollment in Medicare only occurs if you began receiving Social Security or Railroad Retirement Board benefits at least four months before your 65th birthday. Whatever the reason they delayed; it adds up to a lifetime of late fees added to your monthly premiums. This article describes Medicare late enrollment penalties, how to avoid them, and how to appeal them.
Medicare Part A Late Enrollment Penalty
You only pay a penalty for late enrollment if you are not eligible for premium-free Part A. If you or your spouse worked and paid Medicare taxes for 10 years, you don’t pay a fine regardless how late you enroll.
If you do not qualify for premium-free Part A or a Special Enrollment Period, you pay a 10 percent penalty for twice the number of years you failed to sign up. The late fee applies to every full 12-month period that passes. The penalty is based on the Medicare Part A premium amount, which changes every year.
Medicare Part B Late Enrollment Penalty
If you fail to sign up for Medicare Part B during your Initial Enrollment Period (IEP) and you do not qualify for a Special Enrollment Period, you pay a 10 percent penalty for every full year you fail to sign up. That means you pay 10 percent for 12 months, 20 percent for 24 months, 30 percent for 36 months, and so on. You pay this extra fee for the entire time you have Medicare. The Part B premium varies, but the standard for 2021 is $148.50 per month. For example, going 24 months without Part B $29.70 would be added to your monthly Part B premium.
Medicare Part D Late Enrollment Penalty
You pay a late penalty for Part D if your Initial Enrollment Period ends and you let 63 days pass without having one of the following:
- Creditable prescription drug coverage
- A Medicare Part D Plan
- Another Medicare plan, such as Medicare Advantage, that includes prescription drug coverage
The penalty is one percent of the base beneficiary premium (the average cost of a prescription drug plan) multiplied by the number of months you did not have creditable prescription drug coverage, rounded to the nearest $0.10. This amount may change every year. In 2021, the base premium is $33.06. So if you go 24 months without credible coverage, the penalty in 2021 is $7.90 added to your Part D plan.
Normally, you must pay this penalty as long as you have a Medicare drug plan. However, if you qualify for Extra Help or a Special Enrollment Period, you will not have to pay the late fee.
Can I Appeal a Late Penalty?
Yes, you can appeal if your drug plan says you must pay a penalty and you disagree. This is called asking for a reconsideration and your plan will send you the proper form. You must return the completed form within 60 days of receiving notification that you owe a penalty.
How Can I Avoid the Late Enrollment Penalty?
The easiest way to avoid paying these fees is to sign up during your seven-month IEP window. If that ship has sailed, your next best bet is qualifying for a Special Circumstance. If you had coverage through an employer, a spouse’s employer, or you experienced a significant life change such as moving, you may be able to take advantage of a Special Enrollment Period. Finally, if you qualify for Extra Help, you do not have to pay late penalties.
To learn more about Medicare late enrollment penalties contact your Medicare consultant for more information.
Kenneth Kiker, CHC spent 49 years in the insurance industry before retiring in 2011 after working in United Healthcare’s Tucson office for 6 years specializing in their Medicare division. He continues to work with Medicare beneficiaries helping them with their Medicare coverage decisions. Ken achieved his Certified Health Consultant (CHC) designation in 1990 after attending The CHC School of Marketing at Purdue University and passing a series of national program exams. Email: email@example.com.