Understanding the Medicare Late Enrollment Penalty

Which parts of Medicare have late enrollment penalties?

A late enrollment penalty is a fee that Medicare charges if you don’t sign up for the program during certain times.

As with any health insurer, Medicare relies on people with fewer medical needs to support the system and balance the costs for those with greater needs. Charging late enrollment fees helps reduce these costs overall and encourages individuals to enroll on time.

If you want to avoid paying a late fee, it’s important that you enroll on time, even if you don’t have any urgent health concerns and don’t feel you need Medicare coverage.

The parts of Medicare that charge a late enrollment penalty are:

• Original Medicare Part A (inpatient hospital insurance)
• Original Medicare Part B (outpatient medical insurance)
• Part D prescription drug plans

Medicare Advantage (Part C) plans do not have a late enrollment penalty. You can switch over to this type of plan during certain enrollment periods.

Medicare supplement insurance (Medigap) plans also do not have a set penalty. However, rates may go up significantly if you don’t sign up when you’re first eligible. There’s more information on that later on in this article.

Part A late enrollment penalty

Many people are automatically eligible for Medicare Part A with $0 monthly premiums.

If you did not accrue enough working credits during your lifetime to be eligible for premium-free Part A, you can still purchase the plan. However, you have to pay a monthly premium.

If you’re not automatically enrolled and don’t sign up for Medicare Part A during your initial enrollment period (IEP), you’ll incur a late enrollment penalty when you do sign up.

The late enrollment penalty is 10% of the monthly premium.

You need to pay this additional cost each month for twice the number of years you were eligible for Medicare Part A but didn’t sign up.

For example, if you wait 1 year after being eligible to sign up, you’ll pay the penalty amount each month for 2 years.

Part B late enrollment penalty

You’re eligible for Original Medicare from 3 months before your 65th birth month until 3 months after. This period is known as the IEP, and along with Part A, you can enroll in Medicare Part B during this time.

If you’re already receiving Social Security benefits, your monthly premium will be deducted from your monthly check.

If you don’t currently get Social Security benefits and don’t sign up for Medicare Part B during your IEP, you’ll pay a late enrollment penalty, which will be added to each Medicare Part B monthly premium.

Your monthly premium will increase by 10% for each 12-month period in which you could have had Medicare Part B but chose not to enroll. There are various online tools available to help you calculate your specific Part B late enrollment penalty.

You’ll pay this additional fee for as long as you have a Part B plan.

If you’re eligible for a special enrollment period (SEP), you won’t incur a late enrollment penalty, provided you sign up during that time.

Special enrollment periods are available to those who don’t sign up for Medicare Part B during their IEP because they have alternative health insurance, such as through their employer, union, or spouse.

Part D late enrollment penalty

You’ll become eligible to enroll in a stand-alone Medicare Part D prescription drug plan at the same time you become eligible to enroll in Original Medicare.

You can enroll in Part D for 3 months from the time your Original Medicare plan becomes active. Enrolling during this time will not trigger a late enrollment penalty.

If you wait until after this window to enroll, a late enrollment penalty will be added to your monthly Part D premium.

This fee is 1% of the national base premium multiplied by the number of months you were late to enroll. The Part D base premium typically changes annually.

The penalty is permanent and will be added to your Part D premium for as long as you have an active Part D plan.

If you’re eligible for an SEP and enroll for Medicare Part D during this time, you will not incur a penalty. You will also not incur a penalty if you enroll late but are eligible for the Extra Help program.

Medigap late enrollment penalty

Late enrollment for Medigap (Medicare supplement plans) doesn’t have a financial penalty. However, to get the best rates for your plan, you must enroll during your Medigap open enrollment period.

This period starts the first month you have Medicare Part B and you’re 65 years of age or older.

If you miss Medigap open enrollment, you may pay a much higher premium. You could also be refused a Medigap plan after open enrollment if you have what insurers consider a preexisting health condition.

Medical Perspective

“A preexisting condition is typically any health condition diagnosed or treated within the 6 months before your policy starts. Outside of your Medigap open enrollment period, insurers may use medical underwriting to deny coverage or impose a 6-month waiting period before covering that condition.”

— Debra Sullivan, PhD, MSN, RN, CNE, COI

Understanding Medigap Underwriting

_{Quotes represent the opinions of our medical experts. All content is strictly informational and should not be considered medical advice.}

How to avoid late enrollment penalties

To avoid penalties when you decide to enroll in Medicare, you need to:

• ensure you have alternative creditable coverage during the time you’ve been eligible for Medicare but have chosen not to enroll
• enroll during your SEP

SEPs can last for different periods depending on your circumstances. Ensure you are familiar with the length of time you have to enroll under an SEP.

The takeaway

If you wait to apply for Medicare, you may incur long lasting, expensive penalties.

You can avoid late enrollment penalties by signing up for Medicare when you first become eligible, such as during your initial enrollment period or, if you’re eligible, during a special enrollment period.