July 21st 2022
By Ari Parker
The Medicare maze results in confusion around how and when to enroll in Medicare. Learn how Medicare late enrollment penalties work and how you can avoid them.
Medicare can be a bit of a maze. As a result, many people are unsure of how and when to enroll. Not enrolling in time could result in lifetime financial penalties, so it’s important to know your Initial Enrollment Period and work with a licensed Medicare advisor to ensure you get the right coverage at the right time.
The good news is that Medicare late enrollment penalties are fairly easy to avoid if you understand how they work. Read on to learn about the penalties for the different Parts. If you have questions at any time, please don’t hesitate to call us for answers. Our advice is always free.
The majority of Americans receive premium-free Medicare Part A, for which there is no late enrollment penalty, regardless of when you enroll.
The exception is If neither you nor your spouse have worked and paid taxes for 10+ years In this case, if you miss your Initial Enrollment Period, you’ll have to wait until the General Enrollment Period (January 1 - March 31 every year) to enroll and pay a penalty on top of your premium. The penalty amount is 10% of the monthly premium, and you’ll need to pay it for twice as many years as you waited to enroll. So, if you miss your Initial Enrollment Period and sign up the following year during the General Enrollment Period, you’ll need to pay the penalty for two years.
Your Medicare Initial Enrollment Period is a 7-month window that’s unique to your birth month. The window begins three months before the month in which you turn 65, includes the full month of your birthday, and extends until three months after. During this time, confirm that you are enrolled in Medicare Part A by either receiving your Medicare red, white, and blue card, viewing your status via your Medicare account or Social Security account online, or calling the Social Security Administration. If you are not enrolled, contact Social Security to sign up to avoid late enrollment fees.
If you don’t sign up for Medicare Part B during your Initial Enrollment Period, and you don’t qualify for a Part B Special Enrollment Period, you’ll be on the hook for a monthly penalty—most likely for every month you are enrolled in Medicare Part B.
The penalty is 10% of your monthly premium for every year you waited to enroll. So, if you waited for two years after your Initial Enrollment Period to enroll and don’t qualify for a Special Enrollment Period, then you’ll have to pay 20% (10% for each of the two years you were late) on top of your monthly premium for as long as you’re enrolled in Medicare Part B. This Part B premium penalty lasts for as long as you have Medicare coverage.
A penalty for, well, forever can be a huge burden, especially for seniors, who are often on fixed incomes. To avoid the Part B penalty, be aware of both your Initial Enrollment Period and your eligibility for Special Enrollment Periods.
If you are not eligible for a Special Enrollment Period, confirm that you are enrolled in Medicare during your Initial Enrollment Period. If you know you’re eligible for a Special Enrollment Period, then you can wait to sign up for Medicare Part B. That said, it might be worth comparing your current health insurance to Medicare Part B to see if you could receive better coverage and/or save money. Curious about what Part B will cost? Learn about monthly Medicare premium costs.
Part D (prescription drug coverage) is optional for Medicare beneficiaries, but not signing up when you first become eligible can result in penalties if you choose to enroll later. Just like with Medicare Part B, the Part D Medicare penalty lasts for as long as you are enrolled in a Medicare prescription drug plan.
The penalty amount is determined by the national base beneficiary premium (which is a fancy term for the average bid of insurers and the number of people enrolled in each plan) and the number of months you went without Part D coverage. This base beneficiary premium changes every year.
In 2025, the national base beneficiary premium is $36.78. If you went without coverage for 14 months, you’d multiply $36.78 by .14 to come to a monthly penalty of $5.15. You'll then round this number to the nearest ten cents to get to $5.20. You’d have to pay this monthly late enrollment penalty on top of your Part D premium.
If you're receiving Extra Help benefits, you will not pay a Medicare premium penalty for late enrollment in a Medicare drug plan.
The easiest way to avoid the Part D enrollment penalty is to sign up for Part D when you first enroll in Medicare. If you have prescription drugs you’re already taking, you should take a look at Part D plans anyways, and if you don’t have any prescriptions at the time of your initial Medicare enrollment, then you can sign up for a low-cost plan to play it safe. There are a couple of other ways to avoid the Part D enrollment penalty:
Make sure you never got more than 63 days without creditable prescription drug coverage through Medicare or another credible insurer
Choose to never enroll in a Part D or Medicare Advantage plan
If you choose to enroll in a Medicare Advantage plan, it will replace your Original Medicare (Part A & Part B). Because you must already be enrolled in Original Medicare to be eligible for a Medicare Advantage Plan, there are never any late enrollment penalties. You can sign up for a Medicare Advantage plan during your Initial Enrollment Period, after you enroll in Parts A & B, or you can wait until the Annual Enrollment Period, which lasts from October 15 - December 7.
Medicare Supplement plans were introduced because Original Medicare only covers about 80% of the costs of services. These plans are optional and are meant to help cover gaps in costs of Medicare covered services, rather than adding to the covered services. There aren’t any penalties for enrolling in Medicare Supplement plans outside of your Initial Enrollment Period, but there can be consequences. You can sign up for Medicare Supplement plans any time, but during The Medigap Open Enrollment Period (the first six months after your Medicare Part B effective date), you have guaranteed issue. Guaranteed issue means insurance companies must accept you into their plans without medical underwriting. If you apply outside of your Medigap Open Enrollment Period, then you no longer have guaranteed issue, will likely have to undergo medical underwriting, and may not be able to secure the plan you want.
If you have employer coverage or you’re on a group health plan that you like, you can delay your Medicare enrollment and use a Special Enrollment Period. Medicare beneficiaries who sign up using a Special Enrollment Period won’t have to pay any late enrollment penalties.
There are other Medicare late enrollment penalty exceptions. You can qualify for a Special Enrollment Period for a number of reasons based on certain life events. Some events include:
You are no longer eligible for Medicaid.
Your health plan or employer gave you misleading information that caused you to miss your chance to sign up for Medicare.
You were impacted by a natural disaster.
You were released from incarceration.
You recently moved to a new location outside of your Medicare drug plan or Medicare Advantage plan’s service area.
If you didn’t experience any of these events, but you believe you should qualify for a Special Enrollment Period, you can get in touch with Social Security and explain your situation. It may be worth doing to avoid the late enrollment penalty. We can also help you understand your eligibility for a Special Enrollment Period.
Medicare isn’t the easiest program to understand, and enrollment penalties can cause fear among elderly Americans, who are generally concerned about money in retirement.
You might be wondering why enrollment penalties exist in the first place. Medicare late enrollment penalties exist to ensure there is a large pool of individuals paying premiums. Insurance companies rely on a large number of members, especially healthier members, to be able to cover the needs of the entire group. Basically, if everyone signed up only when they needed insurance, then there wouldn’t be enough money for them to cover the medical costs for everyone needing care.
Navigating the Medicare maze can be tricky, and that’s why we’re here to help! Schedule an appointment or call us at 855-900-2427 to speak with a licensed Medicare Advisor who can help you:
Understand your options and enrollment periods
Sign up for the best coverage for your individual needs
Feel at ease, knowing you’re supported every step of the way
