The best time to enroll in Medicare is when you first become eligible. Waiting and delaying your enrollment, could cause you to miss out on the Medicare plans you wanted. Most importantly, delaying your enrollment could come with some hefty penalties.
If you had a job (or spouse had a job) during your working days for at least ten years (or 40 quarters), you are automatically eligible for Medicare Part A coverage that is premium free. However, during your working days, you must have paid Medicare taxes through your employment.
If you do not qualify for Medicare Part A coverage that is premium-free, it’s highly recommended to sign up when you are first eligible. If you do not sign up when eligible, then after your account is set up, you could be subject to a 10% penalty on your monthly premium. This is regardless if you were late by one day or 45 days.
To further highlight the importance of signing up for Medicare when you near your 65th birthday, you need to take into consideration the length of the penalty. When you are penalized, you are required to pay this new premium amount (the base premium plus 10%) for twice the number of years that you did not enroll in Medicare Part A.
This means that if you delayed enrollment for one year, you would be required to pay the penalty for two years.
Enrolling in Medicare late is never a good thing. However, the stakes are even higher when it comes to Medicare Part B. With Medicare Part A, it may be premium free depending on if you qualify. Medicare coverage B is not like that at all, everyone who has it pays a premium. If you are late signing up for Medicare Part B, the penalty is 10% more for each 12-month period that you could have signed up but did not.
To put this into perspective, imagine that your Initial Enrollment Period ended January 15th, 2015. However, you wait until March 2017, while the General Enrollment Period is going on to enroll. In the time span that has elapsed, two full 12-month periods have gone by. As a result, the Medicare Part B penalty you pay will be 20% higher. Another monumental difference between Medicare Part A penalty, versus Medicare Part B penalty is the time frame that you will be penalized. For Medicare Part B, you might have to pay the penalty for as long as you are enrolled in Medicare.
Note: If you are delaying Medicare enrollment because you are still working, and you have some equal coverage through your employer (or your spouse’s employer), you may not have to pay the penalty. However, you would have had to sign up during the Special Enrollment Period (SEP).
If you are eligible for a Medicare prescription drug plan, or a Medicare Advantage plan that includes some form of prescription drug coverage, there could be a penalty if you enroll late.
When it comes to Medicare Part D coverage, and eligibility to avoid the penalty, there are only a few factors that would not draw a penalty:
Part D penalty costs are heavily associated with how long you went without a credible prescription drug plan, or how long you went without Medicare Part D. To calculate the premium, Medicare takes 1% of the national base beneficiary premium (which was $35.02 in 2018. It will be $33.19 in 2019) and multiplies it by the amount of “full uncovered months” you did not participate in having a creditable prescription drug plan or Part D. The total amount of this calculation is rounded up to the nearest $0.10 and will be a part of your monthly Part D premium for life.
For example: Mr. Smith’s Initial Enrollment Period ended on March 18, 2018. He did not obtain coverage at that time. He is applying for coverage during this years’ Open Enrollment Period. Since he waited his penalty plus fee would be $36.19.
This is how it is broken down:
This is the amount Mr. Smith has to pay for 2019.Note: The national base beneficiary premium fluctuates each year, so there is a chance that your premium could increase each year as well.
To learn more about enrolling in Medicare and penalties associated with late enrollment, contact the professionals at (844) 374-1950. Our licensed insurance experts will be happy to answer any questions you have.