On average, most people qualify for Medicare Part A when they turn 65 years old.
The penalty amounts and guidelines for assessing them will vary depending on if you’re applying late for Medicare Part A, Part B, or Part D.
Medicare Part A Late Enrollment Penalty
Medicare Part A, commonly referred to as Hospital Insurance, is designed to cover expenses related to inpatient care in a hospital or skilled nursing facility, home health care (such as physical therapy, occupational therapy, and speech-language pathology services), and hospice.
On average, most people qualify for Medicare Part A when they turn 65 years old. However, in cases of disability or when specific health conditions exist (such as end-stage renal disease or amyotrophic lateral sclerosis), you may be eligible to sign up for Part A sooner.
Typically, Part A is provided free of charge if you or your spouse paid Medicare taxes for a specified length of time while still employed. This is why it’s often referred to as “premium-free Part A.”
However, if you don’t meet the necessary qualifications and have to pay for Part A—the standard monthly 2019 premiums are $437 if you paid Medicare taxes for 29 quarters or less, and $240 if you paid Medicare taxes for 30 to 39 quarters—you may be assessed a 10 percent late enrollment penalty if you don’t sign up when you first become eligible.
As an example, if your premium is $437 and you waited a year to sign up, your new premium amount would be $480.70.
Base Premium
($437)10 Percent
(.10)Late Enrollment Penalty
($43.70)
Base Premium
($437)Late Enrollment Penalty
($43.70)New Premium Amount
($480.70)
This penalty is applied to your monthly premium amount for two times as long as the number of years you have been eligible to receive Part A but never enrolled.
For example, if you waited one year beyond eligibility to sign up, your penalty is 10 percent and you have to pay this higher amount for two full years. However, if you waited two years beyond your original eligibility date to enroll in Part A, your penalty would be 20 percent and you’d have to pay it for four years—and so on.
Late Enrollment Penalty for Medicare Part B
Part B is the Medical Insurance portion of the Medicare plan. It covers both preventative and “medically necessary” services received on an outpatient basis. It helps with expenses related to ambulance calls, mental health services, and payment for the various types of durable medical equipment you may need, such as blood sugar monitors, patient lifts, wheelchairs, and walkers.
If you don’t sign up for Part B when you’re first eligible, you will be assessed a late enrollment penalty “in most cases,” according to Medicare.gov.
If you don’t sign up for Part B when you’re first eligible, you will be assessed a late enrollment penalty “in most cases,” according to Medicare.gov. This penalty is 10 percent for each 12-month period you were eligible for Part B benefits but did not receive them because you never enrolled.
For example, the standard premium for Part B in 2019 will be $135.50. Therefore, if you were eligible for Part B in January 2017 but didn’t sign up until January 2019, you went two full 12-month time periods without this coverage. This means that your premiums would be increased by 20 percent—a total of $162.60 per month.
Standard Premium
($135.50)20 Percent
(.2, representing the number of 12-month periods without coverage)Late Enrollment Penalty
($27.21)
Standard Premium
($135.50)Late Enrollment Penalty
($27.21)Your Premium
($162.60)
To make matters a bit more complex, the only time you can sign up for Medicare Part B is typically during the General Enrollment Period, which is January 1st to March 31st of each year (coverage begins on July 1).
However, there are also Special Enrollment Periods that may make it possible to sign up at a different time of year, potentially keeping you from paying a late enrollment penalty if you can get coverage within this 12-month time frame.
These Special Enrollment Periods include:
- If you move and it changes your plan options or the service area of your current plan
- If you move into or out of a longer-term care facility
- If you lose your current coverage
- If your plan no longer participates in Medicare
- If you are diagnosed with a severe health condition and qualify for a Special Needs Plan
It’s also important to note that unlike the late enrollment penalty for Part A that is only assessed for double the length of time you went without enrolling when you could have, this penalty applies to your premiums the entire time you have Part B.
Medicare Part D Late Enrollment Penalty
If you have Original Medicare, Part D (the Prescription Drug Plan) can be purchased independently to help offset your medication-related expenses. Late enrollments can be assessed under Part D if the initial enrollment period has ended and you have gone 63 consecutive days without one of the following:
- A Medicare Prescription Drug Plan
- A Medicare Advantage Drug Plan
- An alternative Medicare plan providing drug coverage
- Prescription drug coverage through a non-Medicare plan with benefits that pay as much as (if not more than) Medicare drug coverage, also known as “creditable prescription drug coverage”
If you have Original Medicare, Part D (the Prescription Drug Plan) can be purchased independently to help offset your medication-related expenses.
If a penalty is assessed under Part D, the amount of that penalty is 1 percent of the “national base beneficiary premium” per month for every month that there was no prescription drug coverage, starting with the initial eligibility date.
For example, if you were eligible for coverage on January 1st of 2018 and had no type of prescription coverage and also didn’t apply for Part D until December 2018 during open enrollment, you would have gone 12 months with no drug benefits (because the new policy would not begin until January 1, 2019). Therefore, your penalty would be 12 percent of your base premium.
When calculated, this penalty is rounded to the nearest $0.10 and added to the base monthly premium you’re required to pay. In 2019, this premium is $33.19. So, instead of paying the base rate of $33.19 per month for Medicare Part D in 2019, your monthly costs with the late enrollment penalty would be $37.19.
Base Premium
($33.19)Penalty of 12 Percent
(.12)$3.98Round $3.98 to nearest $0.10 $4.00
Base Premium
($33.19)Penalty
($4.00)New Payment Amount
($37.19)
As with Part B, this penalty also applies “for as long as you have a Medicare drug plan.” And if you pay just the base amount and not the penalty, you can be disenrolled from the drug plan.
How to Avoid Late Enrollment Penalties
To avoid late enrollment penalties across all of the different parts of Medicare, you must sign up when you’re first eligible. While that may not be an issue with Part A if you qualify for the premium-free plan, the decision to sign up for parts B and D upon eligibility can be a little more complex.
To avoid late enrollment penalties across all of the different parts of Medicare, you must sign up when you’re first eligible.
For example, if you are still working and have health insurance coverage through your employer, whether or not you face a potential late enrollment penalty for Part B depends on the number of employees at your company.
Specifically, if your employer’s business has 19 employees or less, you may be subject to a late enrollment penalty if you don’t sign up when eligible. However, if your employer’s company has 20 employees or more, you may be able to delay enrollment without facing a penalty.
There are also special considerations regarding Part B late enrollment penalties based on factors such as:
- Whether your spouse has coverage through work, the size of his or her employer, and when that coverage is due to end
- Whether you’re an active-duty service member who has TRICARE
- Whether you have end-stage renal disease
If your goal is to avoid a late enrollment penalty on Part D (the Prescription Drug Plan), you should either join when you’re first eligible or don’t go more than 63 consecutive days without some type of drug coverage. In the latter situation, be sure to keep records of this other coverage so you can provide them to Medicare if necessary.
How to Challenge a Late Enrollment Penalty
If you have been assessed a late enrollment penalty on Plan D but disagree with this decision, you have the right to ask Medicare for reconsideration. You’re required to contact the drug plan provider and ask that the reconsideration form be sent to you.
If you have been assessed a late enrollment penalty on Plan D but disagree with this decision, you have the right to ask Medicare for reconsideration.
This reconsideration is conducted by an Independent Review Entity and you should have a decision within 90 calendar days of them receiving your request, according to the Centers for Medicare & Medicaid Services (CMS).
How Often Are These Decisions Changed Or Reversed?
The CMS reports that 39,664 total reconsideration requests were closed in 2017. Of these, 17,629 of the original late enrollment penalty decisions were fully reversed and another 2,334 were partially reversed. That’s more than 50 percent.
Out of the remaining 19,701 reconsideration requests that were closed that year, 10,699 were upheld, 8,937 were dismissed, and the final 65 were withdrawn.
You can also contact your State Health Insurance Assistance Program (SHIP) for assistance with your appeal if you’d like. If you’re unsure of how to do this, visit their website, click on the “SHIP Locator” button, and you’ll find contact information for your local SHIP.
If you are assessed a penalty on your premiums for Part A or Part B, your only option is to request help from your state or to apply for a Medicare Savings Program to help cover the premiums.
The four Medicare Savings Programs currently being offered, as well as their income and resource limits (for 2018), are: