By: Lynda Tull, Associate Advisor
Medicare is confusing. The main Medicare coverages are Medicare Part A, Medicare Part B, and Medicare Part D. On top of that, there are also optional Medicare supplement and advantage plans. To make things more confusing, you could get stuck with a late enrollment penalty for all your main Medicare coverages. This can happen if you don’t enroll when you first become eligible or when you qualify for a Special Enrollment Period (SEP), which ever comes later. A SEP allows you to enroll after your Initial Enrollment Period if you have qualified employer group coverage or qualifying coverage. Continue reading for the breakdown of the real cost of not enrolling when you first become eligible.
Medicare Part A (Hospital Coverage): Most people get this “premium free,” meaning you, or your spouse, have paid Medicare taxes for 40 quarters or more over your working life or you are eligible for Social Security benefits.
However, if you are in the small percentage of people who have to pay for your Medicare Part A, you can be subjected to a late enrollment penalty. That penalty is 10% over your premium for twice the number of years you were eligible but didn’t sign up.
For example, if you waited 2 years after you were eligible, you’d pay a penalty for 4 years.
Rule of thumb – enroll in Part A during your 7-month initial Enrollment Period, starting 3 months before you turn 65 if you qualify for Premium-free coverage, or in your SEP if you don’t.
Medicare Part B (Doctor Coverage): The 2019 base premium is $135.50. This could be higher based on your income, See Link for more information.
As for late enrollment, you can be penalized up to 10% per full year of non-Medicare coverage that you should have been enrolled. You have this penalty for as long as you have Part B.
An example shown on Medicare.gov: you were eligible to enroll in December of 2016 but waited to enroll until March 2019.That is 2 full years plus a few months (27 months total) that you weren’t covered. You would have a 20% penalty per month for the entire time you have Medicare Coverage. [10% per full year = 20% X $135.50 = $27.10 per month penalty] Total Part B cost per month = $135.50 + $27.10 = $162.60 for 2019
Medicare Part D (Prescription Drug coverage): The late enrollment penalty for Part D is 1% of the “national base beneficiary premium” (NBBP) times the number of full, uncovered months that you didn’t have Part D or creditable coverage. The NBBP is a premium that is determined by the Centers for Medicare & Medicaid services (CMS). This calculated amount changes annually.
For 2019, the NBBP is $33.19, which can change every year, so your penalty will likely change year over year. You will also have this penalty for the entire time you have Part D coverage. You may owe a penalty if you go without coverage for more than 63 days.
If you have additional questions, or would like a free consultation to see if you may be subjected to any of the above penalties I invite you to give me a call and schedule today!