Avoiding Medicare Late Enrollment Penalty
Seniors are expected to enroll in Medicare during their Initial Enrollment Period (IEP) (seven-month window around the 65th birthday or 25th disability check) unless they have other coverage that’s similar in value to Medicare, such as employer group coverage. If you miss your IEP, you may be assessed a Medicare late enrollment penalty on Part A (hospital insurance), Part B (medical insurance), and Part D (prescription drug) coverage.
Here are some things to know about late enrollment penalties:
They are added to your monthly premium
They are not a one-time fee
They increase the longer you wait to sign up
They usually last for the length of time you carry that coverage
How to avoid the Part A late enrollment penalty
If you have to buy Part A because you do not qualify for premium-free Part A*, you will need to sign up when you’re first eligible for Medicare (usually when you turn 65) to avoid a late enrollment penalty. Your monthly premium could go up 10% for twice the number of years you didn't sign up. For example, if you were eligible for Part A for three years, but didn’t sign up, you will owe an additional 10% on your premium for six years. The exception to this is if you qualify to sign up for Part A during a Special Enrollment Period (SEP).
*Most people pay no monthly premium for Part A because they or their spouse paid Medicare taxes long enough while working (typically at least 10 years). This scenario is commonly referred to as “premium-free Part A.” If you are unsure whether you qualify for premium free Part A, contact a local Medicare agent for help.
How to avoid the Part B late enrollment penalty
Unless you have comparable coverage when you first become eligible for Medicare, you are expected to enroll in Part B during your IEP or face late enrollment penalties. (If you do have creditable coverage when you turn 65, you will qualify for a SEP when that coverage ends.) If you do not enroll during your IEP, you may be subject to a 10% penalty on your monthly premium for each year that you could have signed up for Part B, but didn’t. Any penalties you incur will stay with you for the rest of the time you are enrolled in Part B – typically for the rest of your life. For example, if you waited two full years to sign up for Part B and didn’t qualify for a Special Enrollment Period, you would have to pay a 20% late enrollment penalty (10% for each year that you were eligible).
How to avoid the Part D late enrollment penalty
Unless you have creditable drug coverage or qualify for Extra Help when you first become eligible for Medicare, you are expected to enroll in Part D during your IEP or face late enrollment penalties. (If you do have creditable coverage when you turn 65, you will qualify for a SEP when that coverage ends.) If you do not enroll during your IEP, you may be subject to a 1% penalty on your monthly premium for each month that you went without Part D drug coverage, beyond 63 days. Any penalties you incur will stay with you for the rest of the time you are enrolled in Part D – typically for the rest of your life. For example, if you waited 13 months to sign up for Part D and didn’t qualify for a Special Enrollment Period, you would have to pay a 13% late enrollment penalty for the amount of time you are enrolled in Part D, even if you switch plans.
What if I don't agree with the late enrollment penalty?
If you are paying a Part D late enrollment penalty but would like to dispute it, you may be able to ask Medicare to review the decision through a process called “reconsideration.” Contact your drug plan for information about how to request a “reconsideration.” There will be a form to fill out and return along with any relevant evidence. This information must be submitted within 60 days from the date on the letter indicating that a late enrollment penalty has been assessed.
