Avoiding Medicare Penalties

Medicare Late Enrollment Penalties sound scary, but the truth is that they are easily avoidable if you stay on top of your Medicare coverage. Today, we are going to look at what the penalties are and how you can ensure you aren’t hit with surprise fees that could potentially follow you for the rest of your life.

What are Medicare Late Enrollment Penalties?

Late Enrollment Penalties are fees that happen when you deny or delay your Medicare coverage. This is used to incentivize signing up for Medicare and making the most of this public service. There are different penalty rules for Part A and Part B plans.

Medicare Part A late enrollment penalty

If you have to pay for Part A because you do not qualify for the premium-free Part A, then you will have late fees for signing up after your Initial Enrollment Period (IEP). Your monthly premium may go up as much as 10% and you will have to pay this fee for twice the number of years you did not sign up. So, if you wait two years to enroll, you will have Part A fees for four years.

Medicare Part B late enrollment penalty

If you didn’t enroll in Part B when you were first eligible, then your premium may go up 10% for each 12-month period you could’ve had Part B. But, unlike Part A, this doesn’t end after a couple years. This payment increase is for the entire time you have Medicare — which is essentially for the rest of your life.

If you meet certain criteria, such as continued employment after 65 with health insurance, these fees may be waived.

Does Medicare Part D have penalties?

Yes, Part D has penalties. A person enrolled in a Medicare plan may owe a late enrollment penalty if they go without Part D or other creditable prescription drug coverage for any continuous period of 63 days or more after the end of their Initial Enrollment Period for Part D coverage.

Typically, the late enrollment penalty is added to the person’s monthly Part D premium (which is your monthly payment) for as long as they have Medicare drug coverage, even if the person changes their Medicare Part D plan. The cost of the late enrollment penalty depends on how long you went without Part D. As with other penalties, credible alternative coverage can waive the fees.

How do I avoid Medicare penalties?

The easiest way to avoid penalties is to sign up at 65 for Medicare. The fees are for those who delay enrollment, so being prompt on your enrollment is the most obvious way to prevent those penalties from occurring.

You can also have other credible coverage that waives the fees. For example, if you or a spouse are still receiving health insurance through employment that covers your healthcare needs, you can submit that as a credible coverage for as long as the insured person remains in the workforce. Once you’re ready to enroll into Medicare, you will not have a penalty if you ensured that your alternative coverage was accepted by Medicare.

Minimum Acceptable Coverage

Medicare Part A is considered the minimum acceptable coverage you can have while on Medicare. Some might think that having the minimum coverage will protect them for all fees, but that is not the case. This only waives Part A penalties.

If you want to have minimum coverage now to avoid fees later, you can sign up for basic plans. Many people already have Part A paid for through previous employment taxes, and some Medicare Advantage plans have $0 monthly premiums and would satisfy both Part B requirements and often Part D drug plan requirements as well. This provides a happy medium for those who do not have alternative coverage, but do not feel they need a robust medical plan yet.

What happens if I decline Medicare?

If you decline Medicare entirely, you might be opening yourself up to some hefty late enrollment fees down the road when/if you do decide to sign up. Late enrollment fees are applied when you do not sign up during your Initial Enrollment Period. Declining coverage can be costly if you opt to enroll later on.

Conclusion

There are ways to avoid penalties if you are wishing to delay enrollment into Medicare. When considering Medicare, carefully review your options and make sure you are choosing an option that is not only good for right now, but will leave you protected in the future. Remember, we buy insurance to protect our future selves and not just to take care of ourselves in the present.

If you would like to review your Medicare options or would like to discuss enrollment, please reach out to one of our licensed insurance agents. We are always happy to answer any questions you may have and help you find a solution that is right for you.

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