Virtually everyone approaching retirement age knows that Medicare funds most health care expenses after the age of 65. Let’s face it, though: no one relishes getting older. Some near-retirees want to avoid the thought of seeking Medicare as long as possible. That causes them to enroll in the program late. This might seem like a trivial matter, but it can actually have far-reaching consequences. Here’s what you need to know about Medicare late enrollment penalties.
When Should I Enroll in Medicare?
People already getting Social Security, who are under 65 with a disability, or who meet some other qualification criteria may be automatically enrolled in Medicare Parts A and B.
If you’re not automatically enrolled, you have a seven-month enrollment period surrounding the date you turn 65. It begins three months before the month in which you turn 65, includes the month you turn 65, and extends three months after your 65th birthday. If you enroll after this time period, it’s considered late enrollment.
If you wait until after your seven-month enrollment period, you may experience coverage delays. That’s because you’ll only be able to enroll during open enrollment between January 1-March 31 each year.
Medicare Part A
The penalty for late enrollment in Medicare Part A is 10% of your monthly premium paid for twice the number of years you delayed enrollment. For example, if you waited until three years after you were eligible, you would have to pay your monthly premium, plus an additional 10%, for six years following the date of your late enrollment.
Medicare Part B
Late enrollment penalties for Medicare Part B are much more draconian. You might be required to pay the penalty for as long as you remain on Medicare Part B. The penalty goes up by 10% for each year during which failed to enroll past your initial Medicare eligibility. For example, a four-year delay could increase your monthly premium payments by 40%.
Medicare Part D/Medicare Advantage
If you plan to use the Medicare Prescription Drug Plan (Medicare Part D or a Medicare Advantage plan inclusive of prescription drug coverage), during the enrollment period, you may have to pay a late enrollment penalty dependent on the plan you choose. The penalty is relatively low, but involves a complex calculation that begins at 1% of the national base beneficiary premium. If you qualify for Medicare Extra Help, or if you have creditable coverage through your insurance plan, you won’t have to pay a late enrollment penalty.
Penalties built into the Medicare system aren’t the only financial cost associated with late enrollment. For every month that you fail to enroll in Medicare, you’re paying health care premiums and other health care expenses that you might not have to pay if you simply enrolled in Medicare. Factor in this cost to your decision and a failure to enroll in Medicare could easily cost you thousands. Wouldn’t you rather put that money into a retirement account or a vacation home?
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