3 Medicare Late Enrollment Penalties to Avoid

March 4th, 2014 | Posted by Matt Serafini in Medicare Costs | Medicare Eligibility | Medicare Part D | Medicare Plans
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3 Medicare Late Enrollment Penalties to AvoidDepending on which part of the Medicare program you’re looking to enroll in, there may be a Medicare late enrollment penalty to be aware of when seeking health care coverage.

A Medicare late enrollment penalty can be incurred any time you could’ve had Medicare and chose not to sign up for it. Of the four parts of the Medicare program, only Medicare Part C (Medicare Advantage) is optional and does not have a late enrollment penalty. This post will break down these penalties for those who may be nearing their Medicare initial election period and are not sure if they should sign up for Medicare Part A, Part B, and/or Part D coverage.

Part A late enrollment penalty

If you or your spouse has worked 10 years, or 40 quarters, in Medicare-covered employment, you will receive premium-free Part A coverage. Otherwise, you will have to pay for Medicare Part A. If you do not enroll during your Initial Enrollment Period (which begins three months before your 65th birthday and lasts for seven months), then your monthly premium amount may increase up to 10%.

You’ll have to pay the higher premium for twice the number of years you could have had Part A, but didn’t sign up. If you have limited income and need assistance paying for Original Medicare, Part A and Part B, your state may be able to assist you.

Part B late enrollment penalty

Similar to the Part A penalty, if you choose not to sign up for Part B when you were first eligible, or if you dropped Part B coverage and then chose to take it again later, you may face a late enrollment penalty. Your monthly Part B premium amount may increase 10% for each full 12-month period that you could have had Part B, but did not.

If you qualify for a Special Enrollment Period (SEP), then there is usually no late enrollment penalty to worry about. You would qualify for an SEP if you are eligible for Medicare due to age or disability and were enrolled in a group health plan due to the current employment of either yourself or your spouse. In this situation, you also had to be covered by either Medicare Part B or the employer health plan with no less than eight months of lapsed coverage. If you went longer than eight months with lapsed health coverage, then you could be faced with a late enrollment penalty.

Part D late enrollment penalty

You could pay a Medicare Part D late enrollment penalty if you do not sign for Medicare prescription drug coverage when you are first eligible and you go 63 or more days in a row without creditable drug coverage, which is medication coverage as good as or better than Part D coverage.

In these cases, your penalty amount is determined by how long you went without creditable prescription drug coverage. It is calculated by multiplying 1% of the “national base beneficiary premium” ($32.42 in 2014) times the number of full, uncovered months you were eligible but did not join a Prescription Drug Plan or Medicare Advantage Prescription Drug plan. The final amount is rounded to the nearest $0.10 and added to your monthly premium.

The national base beneficiary premium may increase each year, and if that happens, the penalty amount is likely to increase with it.

Avoiding Medicare late enrollment penalties

The Initial Enrollment Period (IEP) remains the best time for you to square away your Medicare coverage. Beginning three months before you turn age 65, you have seven months in total to join Original Medicare, Part A and Part B, as well as choose a private Part D plan for your prescription drug coverage. You may also choose to enroll in a Medicare Advantage or Medigap plan during this time for additional benefits and coverage of costs not covered by Part A and Part B.

There are other Medicare enrollment periods as well, and it is worth familiarizing yourself with your enrollment rights during them.

Have you had to pay any Medicare late enrollment penalties?

Medicare has neither reviewed nor endorsed this information.

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