Does Medicare Have Penalties?
By Crystal A. Manning
Medicare isn’t the easiest program to understand, and enrollment penalties can cause fear among elderly Americans, who are generally concerned about money in retirement. As a result, many people are unsure of how and when to enroll. Not enrolling in time could result in financial penalties, so it’s important to know your initial enrollment period and work with a licensed Medicare advisor to ensure you get the right coverage at the right time.
You might be wondering why enrollment penalties exist in the first place. Medicare late enrollment penalties exist to ensure there is a large pool of individuals paying premiums. Insurance companies rely on a large number of members, especially healthier members, to be able to cover the needs of the entire group. Basically, if everyone signed up only when they needed insurance, then there wouldn’t be enough money for them to cover the medical costs for everyone needing care.
Medicare Late Enrollment Penalties and How to Avoid Them
The majority of Americans receive premium-free Medicare Part A, for which there is no late enrollment penalty, regardless of when you enroll. You must have worked 40 quarters or 10 years, or be a dependent of someone that did, to qualify for premium free part A.
If you don’t sign up for Medicare Part B during your Initial Enrollment Period, and you don’t qualify for a Part B Special Enrollment Period, you’ll have a monthly penalty for every month you did not enroll in Medicare Part B. These penalties do not go away.
A penalty can be a huge burden, especially for seniors, who are often on fixed incomes. To avoid the Part B penalty, be aware of both your Initial Enrollment Period and your eligibility for Special Enrollment Periods. Your IEP is when you can first sign up for Part A (Hospital Insurance) and Part B (Medical Insurance), and it starts 3 months before you turn 65 and ends 3 months after the month you turn 65.
What are the Penalties?
Medicare Part A Penalty
The penalty for Part A is 10% of the current Part A premium. Most people are entitled to Part A for free for paying the Medicare tax while still working. If no employment history or not enough working history (based on credits), out-of-pocket premiums will be applied.
Medicare Part B Penalty
The penalty for Part B is a 10% increase on the Part B premium for each full 12-month period not enrolled but eligible. This penalty does not go away. If eligible for a special enrollment period – enrolled in employer coverage, this penalty can be avoided. Special forms will need to be submitted as proof to Medicare that you did have creditable coverage.
Medicare Part D Penalty
The late penalty for Part D is 1% of the average monthly prescription drug premium (1% of $33.06 in 2021) times the number of months late, rounded to the nearest 10 cents. The penalty is generally enacted if not enrolled within 3 months of Medicare Part A or Part B. This penalty is permanent – must be paid while enrolled in Prescription Drug Coverage.
You may not have to pay the penalty if you had health insurance through your job or your spouse’s job when you were first eligible to sign up for Medicare Part B.
Navigating the Medicare maze can be tricky, and that’s why we’re here to help! Schedule an appointment or call now to speak with a licensed Medicare Advisor who can help you:
Understand your options and enrollment periods
Sign up for the best coverage for your individual needs
Feel at ease, knowing you’re supported every step of the way
For more information, contact Crystal Manning at (412) 716-4942 or crystalmanning33@gmail.com or Dvonya Sedlacko at (412) 657-3889 or djsedlacko@gmail.com.