Enrolling in Medicare as soon as you are eligible is a good idea, both for the health benefits and for the long-term savings. You become eligible for Medicare at age 65, and you have a seven month initial enrollment period during which you may sign up for Medicare’s primary Part A and/or Part B coverage. The federal government staggers this seven month period around your 65th birthday, which means that you can enroll three months prior to your birthday, the month of your birthday, or up to three months after your birthday.
Late enrollment penalties vary based on which Medicare plan you’re pursuing. For this article we will examine the penalties for Part A (hospital coverage), Part B (general medical coverage), and Part D (prescription drug coverage). There are, however, certain late-enrollment exemptions for each type of coverage.
If you’re eligible for free Part A coverage, you may sign up any time during or after the beginning of the initial enrollment period. If you have to purchase Part A or Part B, you can only sign up during a specified enrollment period. Neglecting to sign up for Part B when you are first eligible will incur late enrollment penalties that last for as long as you keep your Part B coverage. You could also end up with gaps in your coverage. If you don’t sign up for Part A and/or Part B when you’re first eligible, you can sign up during the general enrollment period which lasts from January 1 to March 31 each year.
You may be eligible for premium-free Medicare Part A coverage, which means that you would not have to pay a monthly fee. If you or your spouse has worked for at least 10 years and paid Medicare taxes through your employment, you should receive premium-free coverage. If you are not eligible for premium-free Part A coverage, you must sign up when you first become eligible to avoid the late enrollment penalty. The penalty is 10% of your monthly premium, and you must pay it for twice the number of years that you neglected to sign up for Part A.
The Part B late enrollment penalty is even more punitive than the Part A penalty. If you fail to enroll in Part B as soon as you are eligible, you must pay the penalty for as long as you have your Part B benefits. The penalty may also increase by 10% for every annual period that you were eligible but failed to enroll. For example, if you waited two years to sign up, your penalty could be as much as 20% of your monthly premium. You would owe this for the duration of your Part B coverage.
Medicare’s prescription drug plan also has a late enrollment penalty. It varies, and it depends on how long you persist without coverage. Medicare multiplies one percent (1%) of the national base beneficiary premium by the number of months you were eligible for coverage. The amount is then rounded to the nearest 10 cents and added to your monthly Part D premium charge. The late enrollment penalty is subject to change on an annual basis, so as always it is preferable that you sign up for Part D as soon as you are eligible.