Most seniors know that you’re supposed to sign up for Medicare benefits as soon as you’re eligible. But what you might not know is that if you don’t sign up on time, you might incur a late enrollment penalty. But what exactly is this penalty, and how much can it cost you in the end?
Here’s what you should know.
What are late enrollment penalties?
Because Medicare Parts A and B are mandatory, you are required to sign up for coverage when you become eligible. For most people, this will be during the seven-month Initial Enrollment Period (IEP) that happens around your 65th birthday.
If you continue to work after you turn 65 and are covered by an eligible employer’s health insurance plan, you are required to enroll for Medicare during a Special Enrollment Period (SEP) that occurs after you leave that employer or lose your coverage.
If you do not enroll in Medicare Parts A and B during either the IEP or SEP, you may be subject to Medicare late enrollment penalties. These penalties can affect the cost of your Medicare premiums for Parts A, B and sometimes D.
How much are late enrollment penalties?
Late enrollment penalties and their costs differ slightly between the different parts of Medicare.
Medicare Part A
Medicare Part A is free for most American seniors who have worked and paid taxes for 10 years. However, if you are not eligible for premium-free Medicare Part A and do not enroll at the right time, you may incur a penalty.
The late enrollment penalty for Part A is 10 percent of your monthly premium. This penalty is added to your Part A monthly premium for twice the number of years you didn’t have Medicare Part A when you were eligible. So, if you waited one year to enroll in Part A past your eligibility date, the late enrollment penalty will be in place for two years.
Medicare Part B
Medicare Part B requires a monthly premium for all participants. The late enrollment penalty for Part B is applied to that Part B monthly premium.
Unlike the late enrollment penalty for Part A, which only costs you more for a set period of time, the penalty for Part B usually lasts for the entirety of your Medicare coverage. This life-long penalty goes up 10 percent for each 12-month period you go without Medicare Part B after you become eligible.
So, if you are eligible for Medicare Part B in July 2020, but you do not enroll until September 2021, your monthly premium for Medicare Part B may go up by 10 percent, and it will remain at that cost for life. If you do not enroll until September of 2022, your premium may go up by 20 percent.
Medicare Part D
Medicare Part D, which covers prescription drug costs, also charges a monthly premium based on the plan you choose. If you do not enroll in Part D during your IEP or SEP and enroll later, you may be subject to a late enrollment penalty that’s added to your monthly premium, similar to Part B.
Generally, the penalty for Part D is 1 percent of the “national base beneficiary premium” (which changes every year) for the number of full months you were without Part D coverage. This penalty is rounded up to the nearest $0.10.
How to avoid late enrollment penalties
The easiest way to avoid paying late enrollment penalties for any parts of Medicare is to plan ahead and enroll as soon as you’re eligible. Understand whether you need to enroll around your 65th birthday or if you can enroll later during an SEP.
Interested in learning more about Medicare and how to get all the benefits you’re eligible for? SeniorCare Benefits is ready to help. To learn more, please call us at 1-844-484-4221 so one our agents can assist you today.
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