The ins and outs of Medicare can be confusing. The different types of coverage, Medicare Advantage versus Medicare Supplement, and parts that seem to extend from A to Z all make it a rather daunting subject.
On top of all that, there are penalties for failing to get adequate coverage or for not enrolling on time. Today, we’re going to sort through all that so you can avoid paying Medicare late penalties.
How to Avoid Medicare Late Penalties: Parts B and D
If you are eligible for Medicare and choose not to sign up, you will face late penalties if you later choose to enroll; these penalties will apply to the entire period during which you were eligible for but not enrolled in Medicare. Importantly, these penalties are for life.
To avoid paying these late penalties, you’ll want to enroll in Medicare during your Initial Enrollment Period or Special Enrollment Period. We discussed these enrollment periods in more detail in an earlier blog, which you can find here.
For those of you who are already collecting Social Security when you become eligible for Medicare, you will be automatically enrolled in Medicare Parts A and B, thus avoiding any late penalties for these. You may, however, face a late penalty for Part D if you fail to enroll at that time.
There are some cases where you might be automatically enrolled in Medicare Part D, but these are less common.
Should I Delay Medicare Enrollment?
Many of you may delay your enrollment for good reason — you still have coverage from an employer or a spouse’s employer. If this is the case, you will not face penalties for delayed enrollment (as long as you have creditable coverage). If you lose this coverage, you will have to enroll in Medicare during the Special Enrollment Period to avoid penalties.
Non-creditable coverage is, in effect, no coverage when it comes to Medicare. And not all “good” coverage is creditable — sometimes even expensive policies from large employers — so you will want to check with your health insurance provider before delaying enrollment in Medicare. Additionally, employers with fewer than 20 employees typically do not offer creditable coverage.
While creditable coverage is typically only discussed in reference to Part D, it also applies to Parts A and B.
Missing your enrollment period or failing to have creditable coverage does not prevent you from later enrolling in Medicare; you will, however, have to pay late enrollment penalties.
Listen to learn more about Medicare late penalties:
Medicare Part B Late Penalty:
Medicare Part B covers things like medically necessary services and preventative services.
The standard premium for Medicare Part B in 2021 is $148.50. Your premium will be higher if you make over a certain amount of money each year; this extra tax is known as IRMAA, a subject we covered in a recent blog.
For Part B, there is a 10% increase in the standard monthly premium per year without coverage. In other words, for every year you are eligible for Part B and do not sign up, there will be a 10% increase in your premium.
For example, with a standard monthly premium of $148.50 for 2021, delaying your enrollment for 12 months while having no other creditable coverage, would mean a penalty of $14.85 per month. That means you’re paying an extra $14.85 each month — on top of your premium — once you eventually enroll in Part B.
Medicare Part D Late Penalty:
Medicare Part D is essentially prescription drug coverage. Part D Plans can cover the medications not otherwise covered under Medicare Part A and Part B.
The late penalty for Part D is 1% of the “national base beneficiary premium” ($33.06) for every full month you go without coverage — either a Part D plan or alternative creditable coverage, which we covered above.
For example, if you delay enrollment in Part D for 27 months, you will face a 27% penalty; for a national base beneficiary premium of $33.06, this will mean a penalty of $8.90 each month (the monthly penalty is always rounded to the nearest $0.10, so $8.93 becomes $8.90).
There’s a lot to consider when enrolling in Medicare: Which parts should I enroll in? When do I need to enroll? Is my coverage creditable?
Many people don’t realize that these penalties are for life, and they can get quite expensive. With so much at stake, you’ll want the right information when making your choice. From finding the best plan to avoiding those pesky late penalties, Cardinal’s got you covered.