When you become eligible for Medicare it can be overwhelming. There are many parts to Medicare, the scariest part of it all is the late enrollment penalties. There is a late enrollment penalty for just about everything with Medicare.
Part A, B, and D have late enrollment penalties. Then If you don’t enroll in a Medicare Supplement plan during the initial Open Enrollment Period, you could pay a much higher premium than if you did enroll when first eligible. You should be aware of the Medicare enrollment deadlines and try to avoid the late enrollment penalties.
Signing up for Medicare
If you are already receiving Social Security Benefits at the time you turn 65, you will automatically be enrolled into Medicare Parts A and B. You will receive your red, white and blue Medicare card in the mail automatically, about three months before you turn 65.
If this is the case, you only need to worry about Medicare Supplemental coverage and Part D coverage. If you are not receiving Social Security before 65, you need to be responsible and sign up for Medicare Part A and Part B.
You can do this online at https://ssa.gov, calling Social Security at 1-800-772-1213 (TTY 1-800-0778) or by visiting your local Social Security office. It is extremely important that you sign up for Medicare at least three months before you turn 65.
Additionally, if you miss the deadline you could be without coverage until the next general enrollment period for Medicare. This could mean a plethora of late enrollment penalties. If you are covered under a group insurance plan, the Medicare late enrollment penalty might not apply to you. Talk to your benefits coordinator in the office that you work.
Part A Late Enrollment Penalty
Most people will get Part A premium free and won’t have to buy it when first eligible. However, if you are one of the Medicare recipients that must pay a Part A premium, you will want to sign up when you become eligible.
If you don’t sign up when you are first eligible your monthly premium could go up 10%. This higher premium will remain in effect for twice the number of years you could have had Part A but didn’t sign up.
Part A Late Enrollment Penalty Example:
If you were eligible for Part A for 3 years but you didn’t sign up, you will have to pay the higher premium for 6 years. Typically, you don’t need to pay a penalty if you meet certain conditions that allow you to sign up for Part A during a special enrollment period.
Part B Late Enrollment Penalty
This penalty will last as long as you have Medicare Part B, it is very important that you sign up for Part B when you are first eligible. If you do not sign up for Medicare Part B when you are first eligible you will most likely have to pay the late enrollment penalty.
The Part B penalty can cause your premium to go up 10% for each full 12-month period that you could have had Part B but didn’t enroll. Also, if you didn’t enroll when first eligible, you may have to wait until the General Enrollment Period, from January 1 to March 31.
When you enroll during the General Enrollment Period, your coverage will not start until July 1 of that year. If you meet certain conditions that allow you to sign up for Part B during a Special Enrollment Period, you will not have to pay a late enrollment penalty.
Part B Late Enrollment Penalty Example:
If your Initial Enrollment Period ended September 30, 201,5 and you waited to sign up for Part B until the General Enrollment Period in March 2018; your Part B premium penalty would be 20%, even though you waited a total of 30 months to sign up, this included only 2 full 12-month periods. You will have to pay this penalty for as long as you are enrolled in Medicare Part B.
Part D Late Enrollment Penalty
You could owe a late enrollment penalty if, for any continuous period of 63 days or more after your Initial Enrollment Period is over, you go without: A Medicare Prescription drug plan (Part D), a Medicare Advantage Plan that includes prescriptions drugs (Part C), another Medicare health plan that offers Medicare prescription drug coverage, or creditable prescription drug coverage. If you get Extra Help, you don’t pay the late enrollment penalty.
Part D Late Enrollment Penalty Cost
The cost of the Part D late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage. Medicare calculates the penalty by multiplying 1% to the “national base beneficiary premium” ($35.02 in 2018) times the number of full, uncovered months you didn’t have Part D or creditable coverage.
This Monthly penalty is rounded to the nearest $.10 and added to your monthly Part D premium. The national base beneficiary premium will likely increase each year, so your penalty amount will reflect those changes.
Part D Late Enrollment Penalty Example
Ms. Smith is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2014. Ms. Smith has not had prescription drug coverage and she didn’t join by May 31, 2014. During the Open Enrollment Period that ended December 7, 201,6 was when she enrolled in a Part D plan. The Part D coverage didn’t go into effect until January 1, 2017.
Since Ms. Smith was without creditable coverage from June 2014- December 2016, her penalty is 31% (1% for each of the 31 months). For 2018, Medicare calculated Ms. Smith’s penalty using the 2018 base beneficiary premium ($35.02).
So, Ms. Smith’s late enrollment penalty is 31% of $35.02 or $10.90 each month in addition to her plan premium. Here is the math:
.31 (31% penalty) x $35.02 (2018 base beneficiary premium) = $10.86
$10.86 rounded to the nearest $.10 = $10.90
$10.90 = Ms. Smith’s monthly late enrollment penalty for 2018.
Finding Out if You Owe a Penalty
If you suspect you owe a penalty you can call Medicare and ask. If you think you owe a Part D penalty, after you join a Medicare drug plan, the plan will tell you if you owe a penalty and what your premium will be. In general, you will have to pay this penalty for as long as you have a Medicare Part D plan.
If You Don’t Agree with the Penalty
If you do not agree with the penalty you can ask for “reconsideration”, your Part D drug plan will send information about how to request a reconsideration. You will need to complete the form and return it to the address or fax number listed on the form.
You have 60 days from the date on the letter telling you that you owe a penalty. Also, send any proof that supports your case, like a copy of your notice of creditable drug coverage from an employer or union plan. Even if you do not agree with the penalty it is required that by law, you must pay the penalty with the premium.
Medicare drug plans can disenroll members who don’t pay their premiums, including the late enrollment penalty portion. You need to pay the penalty while waiting for an answer on “reconsideration”. It can take 90 days for a Medicare contractor to make a reconsideration.
The contractor will try to decide as quickly as possible. If the Medicare contractor decides the penalty is wrong, then you and your drug plan will receive a letter explaining this decision. Your drug plan will remove or reduce your late enrollment penalty and the plan will send you a letter that shows the correct premium and explains whether you will get a refund.
If the Medicare contractor decides your late enrollment penalty is correct, you will receive a letter and you must pay the penalty.
Medigap Initial Enrollment Period Penalty
Medicare Supplement plans have an Initial Enrollment Period that is 6 months long and begins on the 1st day of the month that you are 65 or over and enrolled in Medicare Part B.
In other words, if you turn 65 in May, your Medigap open enrollment period lasts through October of that year. There is no annual open enrollment into a Medicare Supplement plan (except in CA, OR, MO).
The penalty for enrolling in a Medicare Supplement plan outside of the Initial Open enrollment period isn’t a financial one. However, it could be even worse. If you don’t sign up for a plan when you are in your initial open enrollment, you must “medically qualify” to get coverage.
This means if you have pre-existing conditions or ongoing health problems, you can be denied coverage altogether or made to pay a higher premium because of your health conditions.
It is vital that you know the Medicare enrollment deadlines and follow them when you are turning 65 or signing up for Medicare for the first time. Being aware of the financial costs and penalties can save you a lot of money in the future.