Most people enroll in Medicare at age 65 when they first become eligible. Unfortunately for some, they don’t realize that they could be penalized if they decide not to enroll in Medicare Part B coverage. We’ll discuss the late-enrollment penalty and teach you how to avoid it.

Medicare Part A, Part B, and Prescription Drug Coverage all have late enrollment penalties. They all compound differently.

Medicare Part B Late Enrollment Penalty

Many scenarios could apply when you‘re turning 65 and starting your Medicare journey. Am I going to retire? Will I stay on my group coverage if I continue to work? Do I need all parts of Medicare? When do I need to enroll?

These are all questions that come up when beneficiaries age into Medicare. The truth is everyone’s situation is a little different and the right answer depends on your situation.

What is the Late Enrollment Penalty for Part B?

Medicare Part B is the doctor and medical services portion of Medicare. If you neglect to enroll when first eligible, you may be susceptible to the Medicare Part B penalty.

How are Medicare Part B Late Enrollment Penalties Calculated?

The penalty for Medicare Part B is calculated as a 10% penalty for every consecutive 12 months you go without Medicare Part B and credible coverage. The 10% increase is based on the Medicare Part B premium. The penalty continues in perpetuity.

It’s important to realize that some beneficiaries pay more than others depending on their Income Related Monthly Adjustment Amount or IRMAA. The penalty is not based on what you paying but on the standard premium.

You won’t accrue a penalty if you go for less than 12 months without Part B or creditable coverage. It‘s for each consecutive 12-month period. The penalty will compound based on the years you didn’t have Medicare Part B or credible health insurance.

Avoiding the Medicare Part B penalty

You can do a few things to safeguard yourself from the Medicare Part B penalty. The first thing you need to know is that you must have creditable coverage.

You become eligible for Medicare but continue to work. If your group coverage is as good or better than coverage through Orignal Medicare, you can elect to delay your part B enrollment without being penalized.

In most cases, avoiding the Medicare Part B penalty revolves around knowing when you must enroll in order to avoid the penalty.

What is Creditable Coverage?

Creditable coverage is health coverage that is considered as good or better than the coverage you receive from Original Medicare. Credit coverage includes union, employer, or group coverage if you continue to work. In some cases, retirement coverage can be creditable.

You should always double-check with your benefits administrator to ensure your employer coverage is considered creditable. Just because it’s considered group coverage doesn’t guarantee that it’s creditable medical insurance.

Coverages that are never considered creditable for Medicare Part B are Indian Health Services, Tricare, VA, or COBRA.

The only way you’re allowed to delay Medicare coverage without being penalized is if you are enrolled in creditable coverage.

Keep in mind we’re referring to Medicare Part B only. Medicare Part D has different criteria for what‘s considered creditable coverage.

When Do I Need to Enroll in Medicare Part B to Avoid the Penalty?

When you first become eligible for Medicare, you must enroll during your Initial Enrollment Period if you don’t have creditable coverage. Your Initial Enrollment Period starts three months before the month you turn 65. It continues for three months after.

The other enrollment period that can help you avoid the Medicare Part B penalty is the Special Enrollment Period. Upon losing creditable coverage, you have eight months to enroll in Medicare Part B from the date the coverage ends.

If you miss your enrollment periods for Medicare Part B, you will have to wait until the General Enrollment Period to enroll.

Working Past Age 65

There are considerably more seniors that are working past 65. In many of these cases, they have creditable group medical insurance. While you can delay Part B in this situation without worrying about the Medicare Part B penalty, it doesn‘t mean that you should.

In many areas, the coverage that you can get through Medicare can be less expensive with significantly better coverage. Make sure you speak with a licensed insurance agent as you approach Medicare age to help you determine which is best for your needs.

One of the few benefits of staying in group coverage and delaying your Medicare Part B would be if you’re taking expensive medications. In many cases, expensive medications are covered better on group coverage.

Another reason would be if you have a spouse that is not yet 65. In this case, you may need to stay on your group coverage so your spouse can stay on the group plan. Individual plans for people that are close to Medicare age can be expensive.

Remember if you decide to stay on group coverage and delay your Medicare Part B, the minute your group coverage ends your clock starts for enrolling in Medicare Part B . Upon losing credible coverage you can start your Medicare the following month.

How Do You Get A Medicare Late Enrollment Penalty Removed?

In most cases the Part B Penalty is permanent. The only definite way to remove the penalty is if you qualify for a Medicare Savings Program that will pay your Medicare Part B premium. Medicare Savings Programs are in place to help Medicare beneficiaries with low income and in many cases also have Medicaid.

How to Appeal Medicare Part B Late Enrollment Penalty

Medicare has an appeals process if you believe that the penalty doesn’t apply to you. You can file for a reconsideration. The instructions to file the appeal will be on the letter you receive from the social security administration that notified you of your penalty.

You will fill out the Request for Reconsideration form and attach with to your appeal. Also, you can appeal if you believe you have creditable coverage or Part B. You can also appeal the penalty amount if you think the penalty has been calculated incorrectly.

You have 60 days from the date you receive the letter to file your appeal. If you miss the deadline, you can attach a letter explaining why you filed the appeal late.

FAQs

Is there a cap on Medicare Part B penalty?

No! The Medicare Part B penalty will continue to accrue until you start coverage. At that point, you’ll continue to pay the increased amount monthly.

What is the penalty for Part B late enrollment?

It’s a 10% penalty on top of the Medicare Part B monthly premium. You are given the penalty for each consecutive 12-month period that you’re not enrolled in Medicare and do not have creditable coverage.

What are the exceptions to the Medicare Part B late enrollment penalty?

You can avoid the Part B penalty if you qualify for a Medicare Savings Program or had creditable coverage for the period of your delayed enrollment.

How long does the Medicare Part B penalty last?

The Medicare Part B penalty continues indefinitely.

Why is there a Medicare Part B penalty?

It takes quite a bit of funding to run Medicare. If everyone were to wait until they were sick, it would significantly cost more in costs than the system would bring in to cover the costs.

Can I delay Medicare Part B without a Penalty?

Yes! To delay Medicare Part B without a penalty, you must have a creditable health plan through another source such as a qualified employer-sponsored or retiree program. You should speak with your benefits administrator to see if your group coverage is creditable.

How is Medicare Part B penalty calculated?

It’s a 10% premium penalty on top of the base Medicare Part B premium. There is a 10% assessment for each full 12-month period you go without creditable health insurance coverage or Medicare Part B.

How do you get a Medicare Part B penalty waiver?

You should be provided instructions on how to appeal the late enrollment penalty. It’s provided on the determination letter you receive from Social Security informing you of the penalty.

Getting Help Avoiding the Medicare Part B penalty

We have access to all the Medicare insurance plans available. Our licensed insurance agents are experts at Medicare and have the experience to guide you to the plan that best fits your individual needs. Give us a call or fill out our online request form.

Picture of the author
by Lindsay Malzone, Lindsay Malzone is the Medicare expert for Medigap.com. She's been contributing to many well-known publications as an industry expert since 2017. Her passion is educating Medicare beneficiaries on all their supplemental Medicare options so they can make an informed decision on their healthcare coverage.