A Guide To The Medicare Late Enrollment Penalty

Group of seniors looking at smartphone reviewing medicare late enrollment penalty

Have you ever been looking forward to something, something important to you, but you were a little nervous about? Then, when the time came to do the thing, you forgot about it? Well, that’s what happens sometimes with Medicare. You know it’s an important program, one that can help you save a ton of money on health care. But, it can be kind of intimidating, so you’re a little nervous about it. And then, life happens and the next thing you know, you’ve missed your enrollment. What happens then? Can you still get Medicare? Will you pay late fees? We’ll answer these questions in this guide to the Medicare late enrollment penalty, so let’s dive in.

Basic Medicare Enrollment Timeline

Before we jump into what happens if you miss your enrollment window, let’s review when you’re supposed to enter Medicare.

Aging Into Medicare

Most people enter Medicare when they turn 65 years old. This is known as aging into Medicare. If this applies to you, you’ll have a seven-month window in which to enroll. Your window begins three months before the month you turn 65, and it ends at the end of the third month after the month you turn 65.

You can sign up for Medicare at any point during this window. In some cases, your enrollment will be automatic. Generally, if you’re already receiving Social Security retirement income (or if you’ve signed up to receive it) before your 65th birthday, your Medicare enrollment will be automatic. If your enrollment isn’t automatic, you’ll have to sign up manually.

Getting Medicare Before Age 65

It’s possible to qualify for Medicare before turning 65. This can happen for these three reasons:

  • You receive disability income from Social Security or the Railroad Retirement Board for 24 consecutive months
  • You’re diagnosed with ALS (Lou Gehrig’s disease)
  • You’re diagnosed with End-Stage Renal Disease (ESRD)

In these cases, you’ll usually be automatically enrolled in Medicare, except for when you’re eligible due to ESRD. You’ll have to manually apply in that case.

Getting Medicare If You Work Past Age 65

You might wonder what happens if you work beyond age 65; do you have to get Medicare even if you still have health insurance? Don’t worry. In most cases, you can safely delay taking Medicare as long as you have qualifying health insurance from your employer or spouse’s employer. When that coverage ends, you’ll have an eight-month window in which to enroll. You will have to manually enroll when you work past age 65 and delay starting Medicare.

You can see that whether you age into Medicare, work past age 65, or become eligible early, there’s a good chance you’ll be automatically enrolled. If you’re not automatically enrolled, you’ll be given enough time to enroll on your own. But, what happens if you miss it somehow?

What Is The Medicare Late Enrollment Penalty?

Unfortunately, there are late enrollment penalties for missing your initial enrollment window. There are two different penalties that you can face:

  • Medicare Part B late enrollment penalty
  • Medicare Part D (prescription drug) late enrollment penalty

Let’s review each of these in more detail because there are several differences between them.

Medicare Part B Late Enrollment Penalty

For Part B, you are considered to have enrolled late if you haven’t enrolled in Part B by the time your initial enrollment period expires. As an example, if your initial Part B enrollment period ends on September 30th, and you haven’t enrolled by that date, your enrollment is late.

Note that this applies whether you’re ageing into Medicare at 65, or if you become eligible early due to disability or illness. You’re considered late if you haven’t enrolled by the last day of your enrollment period.

There’s a little bit of a reprieve for Part B enrollment, though. Even though you may be late, you don’t actually have to pay any penalty until your enrollment is late by 12 full months. This means that if you miss your enrollment period, but you get enrolled within 12 months, you won’t actually pay any Medicare Part B late enrollment penalty. Great news, right?

If you miss your initial enrollment, you’ll want to get enrolled right away. Don’t get too excited, though. If you miss your initial enrollment period, you’ll have only one chance to get enrolled: the General Enrollment Period (GEP).

The Medicare General Enrollment Period is from January 1st to March 31st of every year. There’s one more thing you have to know, though. If you enroll during GEP, your Medicare coverage won’t start until July 1st. This sounds pretty complicated, so let’s look at an example.

Your Initial Enrollment Period ended September 30, 2021. You realize that you missed it, and you enroll during the Medicare General Enrollment Period in February of 2022. Your coverage will be effective July 1, 2022. How many months are you late? Nine (you had no coverage for October, November, December, January, February, March, April, May, and June). Since this is less than 12 months, you won’t pay a late enrollment penalty.

Here’s one more example. Your Initial Enrollment Period ended March 31, 2021. Once you realize your mistake, you enroll during the General Enrollment Period in January of 2022. Your coverage becomes effective July 1, 2022. How many months are you late? 15 (you had no Medicare coverage from April of 2021 through June of 2022). Since this is more than 12 months, you will owe a Medicare late enrollment penalty.

Senior paying late enrollment penalty
Even though you may be late, you don’t actually have to pay any penalty until your enrollment is late by 12 full months.

How Much Is The Part B Late Enrollment Penalty?

The late enrollment penalty for Part B is 10% of your premium for every 12 months that your enrollment is late. You’ll pay the penalty only for full 12 month periods. So, in our example above where your enrollment was 15 months late, you’ll only pay 10%. If your enrollment was 30 months late, you’ll pay a 20% penalty (10% x two full 12 month periods late).

For 2021, the Part B premium is $148.50. If your penalty is 20%, your penalty amount is $29.70. This makes your total Part B premium requirement for coverage $178.20. In most cases, you’ll pay this higher premium for as long as you have Part B coverage.

Part D Medicare Late Enrollment Penalty

The Part D late enrollment penalty works a little differently. For Part D, you’ll be considered late if after you’re first eligible for Medicare you go 63 days without “creditable drug coverage.” Drug coverage is creditable if it meets requirements established by the Centers for Medicare and Medicaid Services (CMS).

You’ll pay the Part D let enrollment premium for every month that you’re late. For example, if you should have enrolled in a Part D drug plan by March 31st, but you don’t actually get coverage until July 1st, your enrollment is three months late.

The Part D Medicare late enrollment penalty is equal to 1% of the “national base beneficiary premium” multiplied by the number of months your enrollment is late. You can think of the “National base beneficiary premium” as the national average Part D plan premium. For 2021, the base premium is $33.06. Taking our prior example, if your Part D enrollment is late by 3 months, your total Part D penalty is $0.99 ($33.06 x 1% x 3 months). This amount is added to your Part D plan premium every month. You’ll usually pay the Part D late enrollment penalty for as long as you have Part D coverage.

Can You Reverse The Medicare Late Enrollment Penalty?

Under most circumstances, any Medicare late enrollment penalty you’re assessed will be permanent. However, there are two circumstances where the penalties will be eliminated:

  • If you entered Medicare before 65 due to disability or illness, when you turn 65, you’ll stop paying the penalties
  • If you become eligible for Medicaid or Extra Help you will no longer have to pay the penalties

If neither of these applies to you, you’ll keep paying the penalties as long as you’re in Medicare.

The best way to avoid enrollment penalties is to enroll on time. Stay informed about the rules of Medicare eligibility. If you’d like some help reviewing Medicare, your coverage options, and how to avoid late enrollment penalties, reach out to us today.

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