Every month, hundreds of thousands of Medicare beneficiaries pay late enrollment penalties for failing to enroll in Parts A or B or maintain creditable drug coverage. The top reason given is that they simply didn’t know that failing to enroll when they first became eligible would result in these lifelong penalties. Others were overwhelmed by the process and the number of choices available and they just didn’t act.
There are also people who don’t realize that automatic enrollment in Medicare only occurs if you began receiving Social Security or Railroad Retirement Board benefits at least four months before your 65th birthday. Whatever the reason they delayed, it adds up to a lifetime of late fees added to your monthly premiums. This post describes Medicare late enrollment penalties, how to avoid them, and how to appeal them.
Medicare Part A Late Enrollment Penalty
You only pay a penalty for late enrollment if you are not eligible for premium-free Part A. If you or your spouse worked and paid Medicare taxes for 10 years, or if you qualify for Extra Help, you don’t pay a fine no matter how late you enroll.
If you do not qualify for premium-free Part A or a Special Enrollment Period, you pay a 10 percent penalty for twice the number of years you failed to sign up. The late fee applies to every full 12-month period that passes.
The penalty is based on the Medicare Part A premium amount, which changes every year. In 2018, the monthly premium for beneficiaries with 30 to 39 credits is $227. If you have fewer than 30 credits, the premium is $413. The late penalty is 10 percent of whichever premium applies to you: $22.70 or $41.30.
Medicare Part B Late Enrollment Penalty
If you fail to sign up for Medicare Part B during your Initial Enrollment Period (IEP) and you do not qualify for a Special Enrollment Period, you pay a 10 percent penalty for every full year you fail to sign up. That means you pay 10 percent for 12 months, 20 percent for 24 months, 30 percent for 36 months, and so on. You pay this extra fee for the entire time you have Medicare.
The Part B premium varies, but the standard for 2018 is $134 per month. In this example, $26.80 would be added to your monthly Part B premium.
Medicare Part D Late Enrollment Penalty
You pay a late penalty for Part D if your Initial Enrollment Period ends and you let 63 days pass without having one of the following:
- Creditable prescription drug coverage
- A Medicare Part D Plan
- Another Medicare plan, such as Medicare Advantage, that includes prescription drug coverage
The penalty is 1 percent of the base beneficiary premium (the average cost of a prescription drug plan) multiplied by the number of months you went without creditable prescription drug coverage, then rounded up to the nearest $0.10. This amount may change every year. In 2018, the base premium is $35.02.
Using our above example, if you turned 65 on January 30, 2016, your IEP ended on April 30, 2016. If you waited until 2018’s Open Enrollment Period to purchase Part D (or other creditable prescription drug coverage), coverage won’t begin until July 1. That means you went a full 26 months without a drug plan.
Usually, you have to pay this penalty as long as you have a Medicare drug plan. However, if you qualify for Extra Help or a Special Enrollment Period, you will not have to pay the late fee.
Can I Appeal a Late Penalty?
Yes, you can appeal if your drug plan says you must pay a penalty and you disagree. This is called asking for a reconsideration and your plan will send you the proper form. You must return the completed form within 60 days of receiving notification that you owe a penalty.
In addition to the form, send any proof that supports your appeal. Typically, this would be the notice your former drug plan sent that it was “creditable” coverage.
A Medicare contractor reviews your form and makes their decision within 90 days. In the meantime, you must continue paying your premium, including the penalty. Failure to do so may cause your drug plan to disenroll you. If that happens and you go 63 days without coverage, you will not qualify for Special Circumstances.
If the contractor determines you should not have been penalized, they will inform you and your drug plan. From there, your drug plan will let you know what your new premium is and whether you will receive a refund.
If the contractor decides you do owe the penalty, you receive a letter explaining the decision and must continue paying the extra amount.
How Can I Avoid the Late Enrollment Penalty?
The easiest way to avoid paying these fees is to sign up during your seven-month IEP window. If that ship has sailed, your next best bet is qualifying for a Special Circumstance. If you had coverage through an employer, a spouse’s employer, or you experienced a significant life change such as moving, you may be able to take advantage of a Special Enrollment Period. Finally, if you qualify for Extra Help, you do not have to pay late penalties.
If you need to learn more about your Medicare options, call us toll-free at 855-350-8101. One of our licensed agents can answer your questions and explain your options.