Medicare Late Enrollment Penalties

There are many rules about when you can (and should) sign up for Medicare Part B and Part D coverage. If you don’t sign up when you are first eligible, or within a special sign-up period, you could have to pay late enrollment penalties. These penalties can be large and you can be charged them for the rest of your life. Doing a little homework can help you have all of the insurance you are eligible for and help you avoid paying penalties. Medicare Part B and Part D are 2 separate programs and you must sign up for each one. Let’s take a look at the penalties for each program.

Medicare Part B

• If you don’t sign up during your initial sign-up period (begins 3 months before you turn 65, and ends three months after the month you turn 65 – a total of 7 months to sign up) you’ll have to pay a late sign-up penalty.
• You will have to pay this penalty for as long as you have Part B.
• The penalty is added to your premium. The premium is what you pay every month for your Medicare part B.
• The penalty is 10% of the premium for EACH 12 month period you could have had part B coverage, but did not have coverage.
• You can only enroll in part B during the general sign-up period. This occurs every year from Jan 1-Mar 31^st. Your part B coverage does not begin until July first of that year.

Case Example

Jane became eligible for Medicare part B in April of 2014. Her initial sign-up period ended on July 1, 2014. She decided she didn’t need the coverage and didn’t sign up. In May of 2016, Jane decided she wanted to sign up for Part B.

Jane waited 24 months after her initial sign-up period to sign up, so her part B premium penalty is 20% (two full twelve-month periods at 10% each = 20%).

Jane’s Medicare part B premium would be $144.60.

Her penalty is 20% of this, or $28.92

So Jane’s part B premium is $173.52 per month for as long as she has Medicare part B.

That is a $347.04 penalty PER YEAR, every year for the rest of Jane's life.

Exceptions to the Part B Penalty

There are some exceptions that trigger a Special Enrollment Period (SEP). If you can sign up for Medicare part B in a SEP you will not have to pay the late sign-up penalty. The following events trigger a SEP:

• You had health insurance through your employer or union health plan (or your spouse’s). You have 8 months from when this job or insurance ends to enroll in part B without a penalty.
• You dropped part B because you or your spouse returned to work and had employer/union health coverage. You can sign up for part B again when you/your spouse stop working.
• If you were overseas or volunteering in a foreign country when you turned 65.
• If you have TRICARE and become eligible for Medicare due to disability, ALS (Lou Gehrig’s disease), or kidney disease (ESRD).

It is really important to understand when you are eligible to sign up and do it. The part B premium will be taken out of your social security payment each month. It may feel like a lot of money every month. But if you get sick, you will be paying more for your healthcare and late sign-up penalties in the long run.

For more about Medicare Part B coverage, listen to our health insurance webinar series.

Medicare Part D

You may have to pay a late sign-up penalty if you do not get prescription drug coverage before 63 days after your initial sign-up period ends.

• This prescription coverage can be with a Part D plan, a Medicare Advantage plan, another Medicare health plan that includes prescription drug coverage, or another creditable prescription drug plan.
• The monthly penalty is based on how long you could have had prescription drug coverage but did not.
• The penalty is based on the “national base beneficiary premium.” In 2024, that was $34.70. This can change every year, so the penalty can change every year.
• The penalty is 1% of 34.70 x the number of full, uncovered months you didn’t have Part D or other coverage, and were eligible for it.
• This penalty lasts as long as you have part D.

Case Example

Suzy was eligible to enroll in Part D until July 31, 2020 (the end of her initial enrollment period). She did not enroll in a Part D plan at that time.  She joined a plan during open enrollment in 2022 for coverage beginning 1/1/2023.

Suzy could have had coverage from August 2020-December 2022: 29 months.

Her penalty is 29% of $34.70 (the national base beneficiary premium) or $10.06 per month. This is rounded to the nearest $.10. So her penalty will be $10.10 per month.

Exceptions to the Part D Penalty

• If you have other, prescription drug coverage (such as from an employer, Veterans Administration, Tricare) you don’t have to sign up for a Part D plan. However, if you lose this coverage, you only have 63 days from the date the plan ended to sign up for a Medicare part D plan without a penalty.
• If you have a Part D plan that goes out of business or leaves your geographic area, you had coverage. Just be sure to sign up for a new plan within 63 days of when that plan ends.
• If you are eligible for Extra Help (link to this article), you will not have to pay the penalty.

On the surface, these penalties don’t sound like a lot of money. But if you are sick, disabled, or older and living on a limited income, every extra dollar counts. Take the time to get sign up and get covered to avoid penalties.