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How to Avoid Late Enrollment Penalties with Medicare

A Medicare Late Enrollment Penalty (LEP) is a fee you must pay if you did not sign up for Medicare when you were first eligible. If you had credible coverage during that time or qualify for an exception, you may be exempt from these penalties. 

However, if you failed to start Medicare on time or had a lapse in coverage, you may have to pay a penalty in addition to your monthly premiums. Additionally, the longer you go without coverage, the greater the penalty grows. You must pay some of these penalties indefinitely.

Understanding Medicare Enrollment Periods

Medicare has designated times when you can sign up for coverage called Enrollment Periods. Here’s what you can do during these times:

  • Initial Enrollment Period (IEP): Enroll into Part A, Part B, and/or Part D during the 7-month Initial Enrollment Period, which begins three months prior to your 65th birthday and ends three months after.
  • Special Enrollment Period (SEP): Enroll into Part A, Part B, and/or Part D following a qualifying life event, which opens an 8-month Special Enrollment Period.
  • Annual Enrollment Period (AEP): Enroll into a Medicare Advantage or Prescription Drug Plan during the Annual Enrollment Period from October 15th to December 7th.
  • General Enrollment Period (GEP): Enroll into Part A and/or Part B during the General Enrollment Period from January 1st to March 31st.

Medicare Late Enrollment Penalties

You may face a penalty if you failed to sign up for Medicare Part A, Part B, or Part D when you were first eligible.

Medicare Part A 

If you do not receive Part A premium-free and did not sign up for it when you were first eligible, your premium may increase up to 10%. You’ll have to pay this extra amount for twice the number of years you went without coverage.

For example, if you went two years without Part A from the time you were eligible, you will pay up to 10% more for Part A for the next 4 years. 

Medicare Part B

The LEP is calculated differently for Part B and Part D. For each year you delay enrolling in Part B, you will have a 10% penalty (unless you qualify for a Special Election Period). 

So, if you went two years without Part B, you would pay a 20% penalty for the next two years. You may also pay a surcharge for your Part B coverage if your income is above a certain limit.

Medicare Part D

This penalty has a lifelong impact because it remains as long as you carry Medicare drug coverage; it is an additional 1% for each month you did not have credible drug coverage. This is then multiplied by the national base premium (which is $34.70 in 2024). 

So, if you went 10 months without coverage, your penalty would be $3.50 per month ($34.70 x 0.1 = $3.47, and this is rounded up to the nearest $0.10).

Common Misconceptions Leading to Penalties

Here are several misconceptions that may lead someone to unintentionally acquire a penalty:

  • Assuming enrollment is automatic: Most people who receive Social Security are automatically signed up for Medicare. If you are not receiving Social Security, you must apply for coverage.
  • Believing current coverage negates the need for Medicare: If your coverage is not credible, you will be penalized if you fail to sign up for Medicare.
  • Thinking Medicare Advantage (Part C) eliminates the need for Part D: Not all Medicare Advantage Plans include drug coverage. Beware that you will start to incur a penalty after your 63rd day without drug coverage.

How to Avoid Medicare Penalties

Penalties can be avoided by following these guidelines:

  • Know your dates. Your IEP usually begins three months before your 65th birthday. If you miss this window, you may have to wait longer to get coverage.
  • Seek help early. It is best practice to consult an insurance professional who can help you navigate your options before your enrollment window ends.
  • Keep track of your documentation. If you delayed going on Medicare because you had credible coverage, you will need to show proof when you do apply for Medicare in the future. Be sure to keep notices from Medicare and your current insurer.

What To Do if You’ve Incurred a Medicare Penalty

If you incur an LEP, you can ask for a reconsideration. Typically, a decision must be made within 90 days, and you will receive a letter informing you of the outcome. If it is decided that the penalty is correct, you will have to continue paying it, even if you disagree. 

Medicare offers “Extra Help” to those with limited incomes. If you qualify for Extra Help, Medicare could pay all or part of your Part D premiums, deductibles, and copayments. Additionally, you will not have to pay a Part D late enrollment penalty while you have Extra Help.

All in All

Medicare Late Enrollment Penalties can be avoided by following enrollment deadlines. Staying informed and consulting with an insurance professional early on can save you time and money down the road. 

Dealing with Medicare can be a daunting task, so if you have not done so already, you may want to consider appointing a Power of Attorney who can make future decisions on your behalf if you cannot. Alternatively, you can consult your State Health Insurance Program (SHIP), which provides free Medicare guidance. Whether you decide to take on Medicare yourself, or with help, you have options. 

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