This is the second of two articles concerning Medicare Enrollment. This article discusses the penalties imposed by the federal government if you miss your Initial Enrollment Period. 

If you are, approaching 65 and getting ready to retire you better be paying close attention. Unless you are already receiving Social Security or Railroad Retirement Benefits you will not be notified when you are required to sign up for Medicare. Missing your Initial Enrollment Period may result in gaps in your coverage and a lifetime of financial penalties imposed by the federal government.

The financial penalties you may face are the subject of this article.

Part A late enrollment penalty

If you or your spouse have worked for 10 years or more Medicare Part A is premium free. However, if you are not eligible for a premium-free Part A and you miss you Initial Enrollment Period, your premium may go up as much as 10%

The penalty lasts for twice as long as the number of years that you waited to sign up. For example, if you waited one year to sign up you will be penalized for two years.

Part B late enrollment penalty

Regardless of how many years you or your spouse has worked, you will each have to pay a monthly premium for Medicare Part B. The penalty for late enrollment in Medicare Part B is 10% for each full 12-month period that you have delayed it.

The penalty last for as long as you have Part B coverage. If you delayed enrolling in Part B for 28 months beyond your Initial Enrollment Period your late enrollment penalty would be 20% of the Part B premium. The penalty is for each full 12-month period, so that is why it is 20% and not 30%.

Part D late enrollment penalty

Many people have told me that they did not take any prescription drugs so they thought they did not have to sign up for the Medicare Part D prescription drug plan. Unfortunately, whether you take any prescription drugs or not the government wants you to sign up for a Part D prescription drug plan. If you do not enroll in Part D when you are first eligible you will face a lifelong penalty if you decide to sign up later.

The amount of the Part D late enrollment penalty will depend on how long you went without Part D or other creditable coverage.

Medicare calculates the penalty by taking 1% of the “national base beneficiary premium,” which for 2017 is $35.63. Medicare then multiplies that number by the number of months you didn’t have Part D or creditable coverage. That amount is then rounded to the nearest .10¢ and added to your monthly Part D premium.

The national base beneficiary premium may increase each year, so your penalty amount may also increase each year.

If you are without a prescription drug plan for 14 months, then Medicare will add a penalty of 14% of the national average premium to your drug plan monthly premium.

Here is the math:

.14 (14% penalty) x 35.63 (2017 average premium) = $4.98

$4.98 rounded to the nearest $0.10 = $5.00

If you purchase a drug plan that has a $22.40 monthly premium, your adjusted monthly premium will be $27.40

$22.40 (plan monthly premium) + $5.00 (late enrollment penalty) = $27.40

Once Medicare determines a person’s penalty amount, the person will continue to pay the penalty for as long as he or she is enrolled in a Medicare drug plan.

Medicare has many rules, timelines, and penalties, and on top of that, there are different rules that apply to different situations. That’s why it is important to either be familiar with all the rules and timelines yourself or consult a licensed independent insurance agent who can help guide you through the Medicare maze.

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