How to Avoid Medicare Late Enrollment Penalties (Part B and Part D)
New to Medicare? If you’ve just become eligible for certain parts of Medicare (A, B, D), you need to enroll as soon as possible to avoid financial penalties.
Indeed, reducing your healthcare costs can be as simple as hitting the deadline for Medicare enrollment. Most Americans become eligible before they turn 65. However, few realize that unless you enroll within a certain amount of time, you can be subject to Medical Late Enrollment Penalties.
Some of these include long-lasting penalties adding to your monthly premiums – these can last for years.
Learn how to avoid Medicare late enrollment penalties for Part B and Part D, what happens if you delay, how the Medical donut hole works, and more below.
In this guide:
- Do I Need to Enroll for Medicare When First Eligible?
- When is the Medicare Enrollment Period?
- Parts of Medicare (A, B, C, D) Enrollment Fees
- What If I Delay My Medicare Part B?
- How to Avoid Medicare Late Enrollment Penalties
- What is the Medicare Donut Hole?
- Medicare Part D Prescription Drug Plans
Yes. So long as you are eligible for Medicare, you should enroll in the program as soon as possible to avoid any penalties. All eligible candidates have or are turning 65. Alongside this criterion, individuals may also apply if:
These eligibility requirements apply for all parts of Medicare (A, B, C), except for Part D. In this case, you will need to sign up when first eligible only if you receive “creditable” drug coverage from your (or your spouse’s) employer.
“Creditable drug coverage” refers to prescription drug coverage that pays (on average) the same amount as Medicare’s standard prescription drug coverage. The employer should inform you about your coverage’s credibility each September.
For those new to Medicare, a key part of the confusion is when the Medicare Enrollment Period starts and ends. Lasting seven months, it starts three months prior to your 65th birthday month, includes that month, and concludes three months afterward.
So, if you turned 65 in November, it would include August, September, and October preceding your birthday month; November itself; and December, January, and February following your birthday month.
Regardless of whether you’re healthy or not, you should sign up for Medicare on time. Doing so prevents any risk of late enrollment fees. Only three parts of Medicare charge a late enrollment fee:
- Part A (inpatient hospital insurance)
- Part B (outpatient medical insurance)
- Part D (prescription drug coverage)
As Medicare Part C, or Medicare Advantage, is an additional insurance option for eligible candidates, there are no enrollment fees. Run by private companies, these Medicare Advantage plans provide similar coverage as Part A and Part B alongside additional items and services at any time.
Medicare Supplement Plans (Medigap) also do not set a penalty. However, expect rates to rise dramatically the longer you leave signup after you’re eligible.
Enrollment fees exist to ensure that everyone is paying fairly into the system. Medicare is reliant on people who aren’t sick to support the system. If everyone left it till they were ill, Medicare could not continue.
Part A Late Enrollment Fee
- Medicare Part A often automatically applies at no cost.
- It can be purchased with a monthly premium if not you did work enough lifetime hours.
- A late enrollment penalty applies if you have not signed up during initial enrollment.
- The penalty is 10% of the monthly premium.
- This additional cost applies each month for double the years of late sign up.
Part B Late Enrollment Fee
- Eligibility begins 3 months before the 65th birthday until 3 months after.
- Premium deducted from Social Security benefits, if applicable.
- Late penalty applies if not signed up during this period, payable for life.
- Monthly premium increases by 10% for each 12-month period of late sign up.
- No penalty during special enrollment periods if having other health insurance.
Part D Late Enrollment Fee
- Enrollment is allowed at the same time as Original Medicare eligibility.
- No penalty during the 3-month period post Medicare Parts A and B activation.
- A late penalty applies to the monthly premium if delayed enrollment.
- The penalty is 1% of the average monthly prescription cost, times late months.
- This additional cost is permanent.
- No penalty during special enrollment or if eligible for the Extra Help program.
Medicare Supplement Plans Enrollment Penalty
You do not receive a late enrollment penalty for Medicare Supplement Plans (Medigap). Nonetheless, your rates will rise if you miss the enrollment period, and you can be rejected after this period if you have health problems.
Delaying enrollment in Medicare Part B is never a good idea. As explained, your monthly premium may rise by 10% for each 12-month period after the final date of enrollment. However, this penalty only applies for as long as you pay into Part B.
So, for example, say your 65th birthday was on November 15th, 2022. Your Medicare enrollment period will end on February 15th, 2023. If you left it until March 10th, 2026 – i.e., three years – you could incur a 30% (3 x 10%) premium penalty.
Calculate your Part B Medical Enrollment Penalty here.
Want to defer Medicare enrollment? You do not need to sign up during the enrollment period. However, if you wish to avoid (or minimize) Medicare Late Enrollment Penalties, you should:
- Ensure you enroll during the 7-month enrollment period when your coverage ends or as soon as you realize you are eligible
- Acquire an alternative creditable coverage from the moment you are eligible for Medicare
Of course, if you never wish to use Medicare, enrollment is not an issue, and you will never charge any penalties. Penalties will only apply from the moment you wish to use the system. You could also choose from the private Medicare Advantage plans to gain some of the benefits of Part A or Part B without any risk of late enrollment penalties.
The Medicare Donut Hole is a crucial factor to consider when applying for Medicare Part D. It refers to a gap in prescription drug coverage during which drug costs may rise. The hole begins once your Medicare Part D plan has paid a specific amount during one year of coverage.
You’ll pay more out of pocket until you reach the yearly limit during this period. After you reach this limit, depending on your coverage, your plan may help pay for your prescriptions again.
Alongside a Part D late enrollment penalty, it can result in costly medical bills. Calculate your Part D late enrollment penalty here.
Implemented by the U.S. government, this program helps to offset the potentially high cost of prescription drugs for Medicare beneficiaries.
- Medicare Part D: This prescription drug coverage is not directly offered by the government. Instead, it is delivered through private insurance companies that have established contracts with the government, allowing beneficiaries to select a plan that suits their prescription needs best.
For individuals who find themselves struggling with lower income, the Medicare Part D program includes the provision of the Low-Income Subsidy (LIS), commonly referred to as “Extra Help.”
- Part D Low-Income Subsidy (LIS): The Part D LIS program targets eligible low-income individuals, aiding them by covering the cost of their Part D premiums, deductibles, and co-payments. Eligibility for this Extra Help is determined by the Social Security Administration (SSA) and Medicare, with consideration given to both income and resources.
Specific Part D plans vary by location and are subject to annual changes. Get in touch with us and request a no-cost consultation to find out the best Medicare Part D Prescription Drug plans for you.