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Avoiding Late Enrollment Penalties

Late enrollment penalties can be both significant and permanent in Medicare. It is important that you sign up on time unless you have equivalent coverage from other sources. This article outlines the late enrollment penalties which may be assessed.

Avoiding Late Enrollment Penalties

Enrolling in Medicare on time is a healthy practice, literally. Signing up at the right time is important for many reasons:

  • to continue having healthcare coverage,
  • to avoid paying unnecessary penalties which can be both significant and permanent, and
  • to take advantage of opportunities like guaranteed issue rights, which may not be available later.

It is recommended that you signup during the Initial Enrollment Period (IEP) unless you have alternate equivalent coverage. If you do have equivalent coverage as per Medicare guidelines, it is advisable to validate if the coverage is recognized as ‘equivalent’ by Medicare in order to avoid an unpleasant surprise when you do eventually signup.

If you do have equivalent coverage when you turn 65, you can signup for Medicare when that coverage ends or is no longer equivalent. As per Medicare regulations, you will be eligible for a Special Enrollment Period (SEP). There are various types of SEPs and their duration varies based on the type or situation.

PART A Penalties (hospital insurance)

If you do not enroll in Part A on time, as per Medicare rules you may end up paying a penalty as high as 10 per cent of the premium for two times the number of years you delayed enrolling in Part A e.g. if you did not sign up for three years when you became eligible for Part A, you may end up paying higher Medicare premium for Part A for six (three times two) years.

Note that most people qualify for premium-free Part A. If you qualify, you may not be assessed a penalty since 10% of zero premium would still be zero dollars.

PART B Penalties (medical insurance)

Penalties for delay in Part B enrollment are much more severe than those for Part A.

As per Medicare rules, your monthly Medicare premium for Part B may go up 10 per cent for each 12-month period that you could have had Part B but did not. And this penalty is permanent. For example, delaying enrollment for 36 months could cost you a 30% increase in Medicare Part B premium for as long as you have Part B (lifelong in many cases).

If you missed signing up for Part A or Part B on time, you may do so during the General Enrollment Period (GEP) which runs from January 1st to March 31st every year, for coverage starting July 1st of that year.

Part D Penalties (prescription drugs)

Prescription drugs are a big part of your healthcare expense. On becoming eligible, it is recommended that you get this coverage as soon as possible to avoid any gaps. If you do not have PDP (Prescription Drug Plan) coverage or equivalent CREDITable drug coverage from other means for 63 days or more in a row after your initial enrollment period (IEP), you may have to pay a penalty.

As per Medicare regulations, Part D penalty is calculated by multiplying 1% of the "national base beneficiary premium" ($32.74 in 2023) by the number of full, uncovered months you did not have Part D or CREDITable coverage. This penalty is added to the monthly Medicare Part D premium. Note that the penalty may keep going higher as the “national average premium” increases over time.

The bottom-line is to not go without Medicare PDP coverage or alternative CREDITable drug coverage for 63 days or more continuously after the initial enrollment period has ended. 


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Last Updated: 01-10-2021