If your state pays your Part A premiums through a Medicare Savings Program, you’re not liable for late penalties.
Here’s an example.
That number is rounded to the nearest $.10 and then added to your monthly Part D premium.
When Are You Supposed to Sign Up for Medicare?
Medicare calculates the Part D penalty by multiplying 1% of the “national base beneficiary premium” (.37 in 2022) times the number of full months you went without Part D or creditable coverage.
Once you get hit with a Part B penalty, you’re usually stuck with it for as long as you have Medicare Part B. For most people, that’s the rest of their life.
If you paid Medicare payroll taxes for at least 10 years, you qualify for premium-free Medicare Part A. There’s no late enrollment penalty in that situation.
The national base beneficiary rate usually increases slightly each year, so your penalty amount may also change each year.
It begins three months before you turn 65 and extends three months after your birth month.
The eight-month special enrollment period begins the month after your employment ends or the group coverage plan ends (whichever comes first). During this time, you can sign up for Medicare without facing a premium penalty.
Medicare Part B Late Enrollment Penalty
Medicare relies on healthy people to pay into the program to help offset the higher health care expenses of unhealthy people.
However, the best way to avoid Medicare late enrollment penalties is to sign up for coverage when you’re first eligible.
Extra Help is Medicare’s prescription subsidy program for people with low incomes. If you qualify for Medicaid services, you generally qualify for the Extra Help program.
You can delay enrollment in Part B (and avoid the penalty) if you’re enrolled in creditable coverage.
- Let’s say you don’t sign up for Part B until four years after you’re first eligible.
- You’ll face a premium penalty equal to 40 percent of your premium in addition to your regular monthly payment.
- You’ll keep paying that higher amount for as long as you have Medicare Part B.
You can delay enrollment in Part B (and avoid the penalty) if you’re enrolled in creditable coverage.
- Sarah’s initial enrollment period ended Sept. 30, 2018. She didn’t join a Medicare drug plan and she isn’t covered by any other creditable source.
- Sarah signs up for Medicare Part D in late 2021 and her coverage begins Jan. 1, 2022. She went 39 full months without prescription drug coverage.
- Sarah’s penalty is 39% (1% for each of the 39 months) of $33.37 (the national base beneficiary premium for 2022).
- This equals a penalty of $13.01 each month.
- Since the monthly penalty is always rounded to the nearest $0.10, Sarah will pay $13 each month in addition to her plan’s monthly premium.
How to Avoid the Medicare Part D Late Enrollment Penalty
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Even if you don’t take any medication now, you should join a Medicare prescription drug plan when you turn 65. Many Medicare plans offer little to no monthly premiums.
- A current or former employer or union
- TRICARE
- Indian Health Service
- The Department of Veterans Affairs
- Individual health insurance
In 2022, the Part B premium is 0.10. If you waited four years to sign up, you’d owe .04 (40% of 0.10) on top of the standard Part B premium.
And remember, the standard Part B premium increases slightly each year. So you’ll pay at least 8.14 per month for as long as you have Part B coverage.
Source: thepennyhoarder.com
After your employment-based coverage ends, you’ll qualify for a special enrollment period.
Medicare late enrollment penalties are no joke. They can increase your monthly premium substantially for the rest of your life.
Part A Late Enrollment Penalty
Once you’re no longer enrolled in creditable prescription drug coverage, you have 63 days to sign up for a standalone Part D plan or a Medicare Advantage plan with prescription drug coverage.
You can avoid the Part D penalty if you’re covered under an employer’s prescription drug plan that’s expected to pay, on average, at least as much as Medicare’s standard drug coverage.
You can only enroll in Medicare at certain times.
If everyone waited to sign up for Medicare until they needed it (aka their health declined), Medicare would be unable to keep up with costs.
It’s essential to understand your Medicare options and how these late enrollment penalties work so you can avoid costly premiums in retirement.
Finally, people who qualify for the Extra Help program won’t pay a penalty when they sign up for a Medicare drug plan.
- You were first eligible for Medicare on Jan. 1, 2020 and you don’t qualify for premium-free Part A.
- You didn’t enroll in Part A until Jan. 1, 2022.
- In 2022, people who buy Part A pay a premium of either $274 or $499 per month, depending on how long you or your spouse worked and paid Medicare taxes.
- Your Part A premium will either be $301.40 or $548.90 per month for the next four years.
- After four years, your premium reduces to the standard amount.
You’ll also owe a late enrollment penalty if at any time after signing up for Part D, there’s a coverage gap of 63 or more days in a row when you didn’t have a Medicare drug plan or other creditable prescription drug coverage. This can happen if you drop your current Part D plan and fail to sign up for a different one.
Why Does Medicare Charge Late Enrollment Penalties?
If you’re not sure if your current drug plan counts as creditable coverage, check with your plan provider.
However, if you delay enrollment in Medicare Part D — or a Medicare Advantage plan that includes drug coverage — you could be hit with a penalty if you enroll later.
Technically, enrolling in Medicare Part D prescription drug coverage is voluntary.
You’ll have to pay the higher premium for twice the number of years you didn’t sign up. <!–
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So if you didn’t sign up for Part A for two years after you were first eligible, your Part A premium will be 10% higher for the next four years after you enroll.