United States citizens are eligible for Medicare when they reach 65. If you are receiving benefits from Social Security (or the Railroad Retirement Board) at least 4 months before your 65th birthday, you will be automatically enrolled in Medicare. If you are not receiving Social Security benefits at 65, you will need to watch the calendar carefully, as there is a finite opportunity to sign up for Medicare–a window of time before or after you become eligible. If you don’t sign up in time, there are penalties.
What are these penalties? And how can you avoid being penalized?
When to Sign Up for Medicare
The initial enrollment window for Medicare is
seven months, around your 65
th birthday. The window opens three months before you turn 65 and closes three months after you turn 65. Pre-existing conditions will not prevent you from getting Medicare (although they could limit your ability to get a Medigap policy.)
If you don’t sign up around your birthday, the general enrollment period is between January 1 and March 31. But if you wait to sign up during this period, you may be charged a monthly late enrollment penalty.
Part A Late Enrollment Penalty
Medicare Part A is for hospitalization. It covers inpatient care or short-term care received through skilled nursing facilities. It also covers hospice care or home health care (not unskilled home care). You will need to sign up for Medicare Part A during the initial enrollment period.You won’t have to pay a premium for Medicare Part A if you have paid Medicare taxes for at least ten years. This means that there won’t be a penalty for late enrollment. But you do risk a gap in coverage if you sign up late.
If you
are required to pay a premium and fail to enroll during the initial enrollment period, you will have a
financial penalty. That penalty will be ten percent of the monthly premium. It will be levied against you monthly for as many years as you waited to enroll, times two.
For instance, if you put off enrolling for Medicare Part A for three years, you’ll incur the ten percent penalty monthly for six years. After six years, you will return to the standard premium.
Part B Late Enrollment Penalty
Medicare Part B is medical insurance. It helps cover services from doctors and other healthcare providers. Unlike Medicare Part A, everyone who has Medicare pays a premium for Part B.You must enroll in Medicare Part B during the initial enrollment period. If you don’t enroll during this period, a ten percent
penalty will be levied against you. The penalty will be ten percent for each year you failed to enroll.
But unlike Medicare A, where the penalty eventually comes off, and the premium goes down, it doesn’t with Medicare B. In other words, once you have received a penalty, you will be paying it as long as you have Medicare B. That means if you waited four years to enroll, you would be paying an additional 40 percent on top of the standard premium, with no end.
Part D Late Enrollment Penalty
Medicare Part D refers to prescription coverage. Enrolling is not mandatory, but if you don’t enroll, and later choose to, you could incur a
penalty.
The penalty changes yearly and is based on the “national base beneficiary premium”. This is the average bid that insurers submit to the Part D program and the number of enrollees in the plan. For 2022, that figure is $33.37. To determine the penalty, that number is multiplied by one percent. It is then rounded up to the nearest $0.10. This total is then multiplied by the number of months you’re delinquent in enrolling.
The national base beneficiary premium figure changes every year. And the penalty doesn’t expire. So you'll have to pay it for the duration of your coverage.
Special Enrollment Period
Under special situations, you can wait to enroll in paid Medicare A and Medicare B without incurring a penalty. This is a Special Enrollment Period, and it is a small window.If you have health insurance through a job and you still work, you can enroll in Part A and Part B after the initial enrollment period. This is only the case if you have group health plan coverage or you or your spouse is working for an employer that provides your health coverage.
But if you stop working and lose this coverage, you have eight months to enroll in Medicare Part A and Part B. Keep in mind that the clock starts ticking on these eight months as soon as you stop working. So even if you choose COBRA, you still only have eight months. And if you fail to enroll before the eight months are over, you will incur a penalty.
Avoiding Part D Penalties
There is a way to avoid Medicare Part D penalties besides just signing up promptly. You could choose never to enroll in Medicare Part D and purchase your drug coverage elsewhere.If you already have a prescription plan and don’t want to sign up for Medicare D, keep records. That way, if you lose your coverage or decide to enroll in Medicare for some reason, you can prove that you’ve had the coverage. You won’t have a penalty at that point.
Why Penalties Exist
One of the foundations of a group health plan is having healthy individuals in the plan. This helps defray the overall costs of the plan for everyone.Medicare’s penalty system is based on this premise. Medicare doesn’t want healthy individuals waiting until they are sick before paying into the Medicare plan.
Watch Those Medicare Dates
Health insurance is a necessity, but one for which you don’t want to overpay. So make sure you are attentive to the calendar and enroll in Medicare Part A and Part B before their deadlines. Although the Part A penalty is temporary, the Part B penalty is for a lifetime.The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
