Avoiding the Medicare Late Enrollment Penalty: What You Need to Know

What Is the Medicare Late Enrollment Penalty?

The initial enrollment period for Medicare begins three months before your 65th birthday and ends three months after you turn 65. If you fail to enroll in Medicare during this window or your special enrollment period (if applicable), you must wait for the open enrollment period to join Medicare, and you may have to pay a late enrollment penalty (LEP). LEPs may apply to Medicare Parts A, B, and D.

If you’re late enrolling in Part A, your Medicare Part A penalty may increase your monthly premium by up to 10%. For a Medicare Part B late enrollment penalty, you’ll pay an extra 10% each year you delay enrollment. The LEP for Part D is 1% extra for each month you delay coverage or 12% per year.

Why Does Medicare Give Late Enrollment Penalties?

If you wait to enroll in Medicare until after your initial enrollment period ends, you could be subject to higher premiums for the rest of your life. These penalties may seem harsh, but they exist to keep Medicare available and affordable for people who need it.

Medicare’s late enrollment penalties encourage people to sign up for Medicare coverage during their seven-month initial enrollment period, even if they are healthy and do not urgently need coverage. Otherwise, eligible beneficiaries could delay enrollment until they become sick or otherwise require Medicare benefits. Without enough healthy people enrolled and paying premiums, Medicare would need to raise base premium prices to offset the costs incurred by people using their Medicare benefits.

How Does a Late Enrollment Penalty Work?

If you miss your initial enrollment period for Medicare, you may have to pay late enrollment penalties, some of which last for life. LEPs grow the longer you delay enrollment.

Why Do People Delay Enrolling in Medicare?

Medicare-eligible people might delay enrollment for the following reasons:

• They are unaware of Medicare’s late enrollment penalties.
• They do not want to pay monthly premiums for Medicare.
• They are still working and receiving employer-sponsored health insurance past age 65.
• They received bad advice on when to enroll in Medicare.

Which Medicare Parts Have a Late Enrollment Penalty?

Medicare Parts A, B, and D have late enrollment penalties, as described below:

• Part A: If you do not qualify for premium free Part A and enroll late, expect to pay a higher premium for twice the number of years you delayed enrollment. So if you’re one year late enrolling, you will pay a Medicare Part A late enrollment penalty for two years.
• Part B: Some eligible beneficiaries qualify to enroll in Medicare during a special enrollment period (SEP), meaning they can enroll after their initial enrollment period ends. Others who enroll late must pay a Medicare Part B late enrollment penalty for life.
• Part D: You may receive an SEP for Part D if you have employer-sponsored health insurance or another form of creditable drug coverage, such as prescription drug coverage through the Department of Veteran Affairs or individual health insurance coverage. Medicare also waives the Part D late enrollment penalty for low-income beneficiaries who qualify for the Extra Help program.

When Are You Assigned a Late Enrollment Penalty?

The late enrollment penalties for each Medicare part function as follows:

• Part A: Most people qualify for premium-free Part A coverage, and these beneficiaries are not subject to a Medicare penalty for late enrollment. However, some people with insufficient employment histories must pay a premium for Medicare Part A and are liable to pay penalties if they enroll late.
• Part B: If you have health insurance through an employer with more than 20 employees, you may qualify for an 8-month SEP after losing your employer-sponsored coverage. If you do not qualify for an SEP and enroll late in Part B, your late enrollment penalty may be permanent.
• Part D: If you do not enroll in Medicare Part D within three months of enrolling in Parts A or or go 63 days or more without drug coverage, you might have to pay a permanent penalty unless you qualify for an SEP or Extra Help.

How Much Do Late Enrollment Penalties Cost For Each Medicare Part?

Medicare’s late enrollment penalties are added to your monthly premiums. In most cases, how much your premium increases due to late enrollment depends on how long you delayed signing up for Medicare.

Medicare Part A

If you do not qualify for premium-free Part A, you must buy Part A coverage and pay a monthly premium. If you do so past your initial enrollment period, your monthly premium may increase by 10%.

Medicare imposes the Part A late enrollment penalty for twice the number of years you did not sign up for coverage while eligible. So if you are not eligible for premium free Part A and you enroll three years past your initial enrollment period, you may have to pay a 10% penalty on top of your monthly premium for six years.

In 2023, Part A costs either $278 or $506 per month for Medicare beneficiaries who do not qualify for premium-free Part A, depending on how long they paid Medicare taxes. Those paying late enrollment penalties may see their monthly premiums increase to $305.80 or $556.60, respectively.

Medicare Part B

If you do not qualify for a special enrollment period and you enroll in Medicare Part B past your initial enrollment period, expect your monthly premium to increase by 10% for each year you delayed enrollment while eligible. This Medicare penalty is permanent.

For example, if you waited three years past your initial enrollment period to sign up for Part B, you might pay an extra 30% on top of the base premium price. Since the standard Part B premium is $164.90 in 2023, your monthly premium, in this case, would be $214.27, or even higher, depending on your income.

Medicare Part D

Suppose you have gone more than 63 days without creditable drug coverage and do not qualify for the Extra Help program. In that case, you must pay a late enrollment penalty if you sign up for Part D after your initial enrollment period. Part D’s LEP equals an extra 1% for every month you did not enroll in a Medicare drug plan after becoming eligible. This Medicare penalty lasts for life.

In 2023, the base monthly premium for Medicare Part D is $32.74 (though it may be higher depending on your income). If you enroll in Part D three years after becoming eligible, you will pay a 36% late enrollment penalty, meaning your monthly premium will increase to at least $42.56.

What Is Equitable Relief?

Under certain circumstances, the Social Security Administration may offer equitable relief if you missed your enrollment period. Equitable relief can waive your late enrollment penalties or provide immediate or retroactive Medicare enrollment. Situations that might qualify you for equitable relief include the following:

• Due to challenges contacting the Centers for Medicare and Medicaid Services by phone, you could not submit an enrollment request in time.
• A federal government agent or employee poorly advised you to delay enrolling in Medicare.

Equitable relief only applies if you cannot enroll in Medicare because of a federal employee’s error or inaction. If you missed your enrollment period because your employer gave you bad advice about enrolling in Medicare, you will not qualify for equitable relief.

What To Do If You’ve Already Incurred a Late Enrollment Penalty

If you believe you are eligible for a late enrollment penalty waiver, request equitable relief from your area’s Social Security office. Here’s how to do it:

1. Write a letter explaining how a federal employee’s inaction, misrepresentation, or error caused you to miss your Medicare enrollment period. Be as detailed as possible. Include any relevant names and the dates and times of any relevant conversations or calls.
2. Indicate in the letter whether you seek retroactive coverage, coverage going forward, or an LEP waiver.
3. Call 800-772-1213 or visit www.ssa.gov/locator to find the mailing address of your local Social Security office.
4. Mail your request letter to your local Social Security office. Remember that there is no formal process for responding to equitable relief requests. Social Security does not have to respond by any specific deadline or notify you of their decision.
5. Follow up on your request, ideally one month after submitting it. You might even contact a member of Congress or another legislative representative and ask them to follow up.

If you are denied equitable relief, you may adjust and resubmit your request as often as possible.

How To Avoid a Medicare Late Enrollment Penalty

The best way to avoid an LEP is by joining Medicare during your designated enrollment window. See below for tips on keeping track of Medicare signup periods.

1. Know Your Enrollment Period

Know when your eligible enrollment period starts and ends to ensure timely signup. Your initial enrollment period lasts for seven months surrounding your 65th birthday. Your special enrollment period, if applicable, begins when you become eligible for Medicare and ends eight months after your job-based health insurance coverage ends.

2. Understand the Penalty

Without an understanding of when and how much you could be penalized for delaying Medicare enrollment, you risk paying inflated premium prices for the rest of your life. To avoid this, stay current on Medicare’s rules and penalties surrounding late enrollment.

3. Sign Up During the Initial Enrollment Period

Your initial enrollment period should begin three months before you turn 65, including the month of your birthday, and end three months after you turn 65. If you enroll in Medicare during this seven-month window, you will not incur any late enrollment penalties.

4. Know When You Can Delay Enrollment

Sometimes, you can sign up for Medicare after your initial enrollment period ends without facing penalty surcharges. This applies if you’re eligible for a special enrollment period, usually because you are still receiving employer-sponsored health coverage after your 65th birthday through either your own employer or your spouse’s.

5. Keep Track of Deadlines

If you miss your initial or special enrollment period, ensure you sign up for Medicare during the next general enrollment period, which runs from Jan. 1 to March 31 annually. Keep track of these dates so you can join Medicare as soon as possible. Any further delays can increase your penalties since LEPs are calculated based on how late your enrollment is.

In Conclusion

If you miss your initial or special enrollment period, you might be penalized for joining Medicare Parts A, B, or D late. These late enrollment penalties only get higher the longer you delay signup, and some last for life.

Enroll during the designated windows to ensure you have Medicare coverage when needed and your monthly premium stays low. However, if you miss your designated enrollment periods, join Medicare during the next general enrollment period to avoid higher lifelong penalties. And if you’re late enrolling due to bad advice from a federal employee, request equitable relief to waive any late enrollment penalties.