There won’t be a commercial for it. You won’t get a notice in the mail. At best, it’ll be found in the middle of the Medicare booklet they mailed you. Medicare has a few penalties for not enrolling when first eligible, regardless of need. Medicare is a program that requires everyone who is able to participate in order to keep the books balanced. For this reason, they created penalties for not participating in the main parts of Medicare when you are first eligible. There are of course exceptions to avoid these penalties, but if you don’t know what those exceptions are, then in this case what you don’t know may cost you.
There are 3 main penalties in Medicare. If you do not enroll into Part A, Part B, or Part D when first eligible and you don’t have a qualifying exception, then you will be subject to a penalty when you do enroll at a later date.
Medicare Part A Late-Enrollment Penalty
Most people get Part A premium-free for having worked at least 10 years and paid Medicare taxes during that time. If you don’t happen to qualify for premium-free Part A, then you will need to manually enroll. If you do not enroll when eligible you will be subject to a 10% penalty for the monthly cost of your Part A monthly premium. This penalty will last for twice the amount of time that you went without having Part A from when you were first eligible. For example, if you go a whole year without enrolling into Part A, then you will pay an extra 10% for two years. After that, your cost will go back to the original amount. If you would like more information on enrolling in to Part A, please refer to our class on “How to Enroll into Medicare”. For more information on Part A costs, please refer to our class on “What does Medicare Cover?”.
Medicare Part B Late-Enrollment Penalty
If you don’t sign up for Part B when you’re first eligible, you’ll have to pay a late-enrollment penalty. The only exception is if you keep employer coverage and that coverage is deemed “Creditable”. This will qualify you for a Part B Special Enrollment Period (SEP) when you eventually decide you want to switch over to Medicare coverage. The Part B SEP is an eight-month period to enroll in Medicare Part B after you no longer have coverage from your employer. Using the Part B SEP also means that you will not have to pay a Part B late-enrollment penalty. Those with VA, Christian Medi-share policies, or any other forms of coverage will still be subject to the Part B penalty if they enroll.
Your monthly premium for Part B may go up 10% for each full 12-month period that you could have had Part B, but didn’t sign up for it. This late-enrollment penalty remains with you for as long as you have Part B. Also, you may have to wait until the General Enrollment Period (January 1 to March 31) to enroll in Part B, and your coverage will begin July 1 of that year.
Medicare Part D Late-Enrollment Penalty
The late-enrollment penalty is a dollar amount added to your Medicare Part D monthly premium for not having qualifying drug coverage. You may owe a late-enrollment penalty if you go without any of the following for 63 (or more) continuous days after you first enroll into Medicare Part A or B:
- A Medicare Prescription Drug Plan (Part D)
- A Medicare Advantage Plan (Part C)
- Another Medicare health plan that offers Medicare prescription drug coverage
- Creditable prescription drug coverage
We should explain the last option there. Creditable prescription drug coverage (also called “Creditable Coverage”) is coverage that’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. Most plans that offer prescription drug coverage, like plans from employers or unions, must send their members a yearly notice explaining how their prescription drug coverage compares to Medicare prescription drug coverage and if it’s deemed “Creditable Coverage”. If the Medicare beneficiary doesn’t receive a separate written notice, the individual’s plan may provide this information in its benefits handbook. If the individual doesn’t know if the prescription drug coverage he or she has is Creditable, the person should contact the plan to find out if their coverage is Creditable.
The cost of the late-enrollment penalty depends on how long you went without Part D or Creditable prescription drug coverage.
Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($33.19 in 2019) times the number of full, uncovered months you didn’t have Part D or Creditable Coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium. It’s important to know that this counts the two months (63 days) you had to miss to qualify for the penalty. So, if you go a whole year without coverage, you will pay:
12 (Months) x $0.33 (1% of $33.19) = $4 (rounded up from $3.96)
This $4 will be added to your plan’s premium.
Important Note!: If your plan doesn’t have a premium, such as many Medicare Advantage plans, you will still be billed the $4 monthly by the plan you enroll in. The national base beneficiary premium may increase each year, so your penalty amount may also increase each year.
For questions, a review of your situation, support in enrolling into Medicare or any other Medicare related service, please contact us at the option that best suits you.