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Some people don’t realize that there may be penalties for not signing up for Medicare when they’re first eligible for Medicare. Don’t worry – there are usually ways to avoid these penalties. We’ll take you through some common scenarios.
If you’re already receiving Social Security benefits when you turn 65, you’re typically enrolled in Medicare automatically. That is – you’re enrolled in Original Medicare, Part A and Part B. If this is the case for you, you don’t have to worry about a late enrollment penalty for Part A and Part B. (Keep reading – there’s also a Medicare Part D late enrollment penalty that you should know about.)
However, some people keep working past age 65 and delay receiving Social Security benefits. In that case, you’re not generally automatically enrolled in Medicare.
If you qualify for Medicare by disability, in most cases you’re automatically enrolled in Part A and Part B after 24 straight months of receiving Social Security disability benefits.
See Getting Medicare Under the Age of 65 for more information.
Let’s say you’re not automatically enrolled in Original Medicare, Part A and Part B. In that case, you should generally enroll in Medicare Part A (hospital insurance) as soon as you qualify. Your Medicare Initial Enrollment Period (IEP) usually starts 3 months before the month you turn 65, includes that month, and continues for 3 months after that. It’s a seven-month period altogether.
You could face a late enrollment penalty for Medicare Part A if both of these are true for you:
If you don’t have to pay a Part A premium, you generally don’t have to pay a Part A late enrollment penalty.
The Part A penalty is 10% added to your monthly premium. You generally pay this extra amount for twice the number of years that you were eligible for Part A but not enrolled.
For example, suppose that:
In this example, your Part A premium in 2019 would be $240 per month plus 10% of 240, which is $24. $240 + 24=$264. You’d pay this penalty for 4 years (you delayed enrollment by two years, and the penalty doubles that number of years: 2×2=4). Be aware that the Part A premium can change from year to year, so your penalty amount might also change.
Some people might decide to put off enrolling in Medicare Part B (medical insurance). Most people pay a monthly premium for Part B, and some people are covered under employer or union plans and may not need Part B coverage. If that’s the case for you, you might qualify for a Special Enrollment Period for enrolling in Part B, and you might not have to pay a penalty. (More on Special Enrollment Periods below.)
The Part B penalty is 10% added to your monthly premium. You generally pay this extra amount multiplied by the number of years (12-month periods) that you were eligible for Part B but not enrolled.
For example, suppose that:
In this example, your Part B premium would be $135.50 per month plus 10% ($13.55) times 2 for the number of years you delayed Part B enrollment. 2 x $13.55 = $27.10, so you add $27.10 to $135.50 and get $162.60. You’d pay this amount for as long as you’re enrolled in Medicare Part B.
Be aware that the Part B premium can change from year to year, so your penalty amount might also change.
As with Part A, there are some situations where you may be able to enroll in Part B without a penalty, if you qualify for a Special Enrollment Period (more on this later in this article).
Medicare Part D is prescription drug coverage that you get from private, Medicare-approved insurance companies. It’s optional, yet there’s a late enrollment penalty if you don’t sign up when you’re first eligible for Medicare, and decide at some later date that you want this coverage.
However, if you have prescription drug coverage that pays, on average, at least as much as Medicare’s standard prescription drug coverage would pay, you might not have to pay this penalty. This is called having “creditable” coverage.
For example, suppose that:
This is how Medicare calculates your Part D late enrollment penalty. Take 1% of the current “national base beneficiary premium” ($33.19 in 2019) – that’s 33 cents ($.33). Round to the nearest $.10, and you get $.30. Multiply that by the number of months you were eligible for coverage under Medicare Part D, but didn’t have it. Just count the full months, so in the example above, count July 2017 as the first month and June 2019 as the last full uncovered month. That makes 24 months without coverage.
So in this example, you’d pay $.30 x 24 = $7.20. Your Medicare Prescription Drug Plan will add $7.20 to your premium, and you’ll pay the penalty as long as you have Medicare prescription drug coverage.
Be aware that the Part D national base beneficiary premium can change from year to year, so your penalty amount might also change.
There are some situations where you might be able to delay enrollment in Medicare without having to pay a late enrollment penalty. You might qualify for a Medicare Special Enrollment Period. For example, if you’re still covered under an employer or union plan, or your spouse’s plan, you may be able to switch to Medicare coverage after your Medicare Initial Enrollment Period without a penalty. Generally there’s a time limit on making this transition, so if your other coverage is coming to an end, you might want to talk to your plan administrator about switching over to Medicare. You can also ask a licensed eHealth insurance agent.
If you delay enrollment in Medicare Part A, Part B, and/or Part D, you might not be able to enroll just anytime. You might have a Special Enrollment Period, which varies depending on your situation. Or, you might need to enroll during a specific Medicare Enrollment Period or an Election Period for Medicare Prescription Drug Plans.
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