Medicare Enrollment Penalties

Medicare takes over when workplace health coverage ends. As people age out of the workplace it is important to understand the rules governing Medicare. There are serious financial penalties for failing to enroll in Medicare at the proper time.

The age for Medicare eligibility is 65. The initial enrollment period begins 3 months before a person turns 65 (it includes the month of the 65th birthday) and ends 3 months after the month the person turns 65.

Many people are automatically enrolled in Part A when they turn 65. Enrollment in Part A (hospital coverage) is automatic if the person worked and paid Medicare taxes for at least 10 years during their working life. If they qualify for automatic enrollment, there will be no premiums for Part A.

If they did not work outside the home and pay Medicare taxes for 10 years, they must apply during their enrollment period. They will be charged a monthly premium.
For instance, if a car loan is signed over to a child of the deceased, they would be able to keep the car as long as regularly scheduled payments were made on time.

There is no automatic enrollment for Part B. If a person wants Medicare - Part B, they must take the necessary steps to enroll. Part B Medicare is the part that covers doctor visits, diagnostic tests, physical therapy, etc.

If a person is still working when they turn 65 and have health insurance coverage under a group insurance plan through your employer, they may be able to sign up for Medicare during a special enrollment period (SEP). They may be able to sign up for Medicare, Parts A, B, and D, at a later time, without penalty. This also applies if they are disabled and covered by employer provided health coverage through their spouse. If either of these special circumstances apply, they will have an 8 month special enrollment period to sign up for Medicare that begins: (1) the month after the employment ends, or (2) the month after the group health plan based on current employment ends, whichever event occurs first.

If they did not sign up for Medicare during the initial enrollment period, they may be eligible to apply for both Medicare Part A and Part B during the general enrollment period between January 1 and March 31, but only if both of these circumstances apply:

• They did not sign up when they were first eligible, AND 
• They are not eligible for a special enrollment period (SEP)

If a person is not automatically enrolled in Part A, and if they fail to sign up during the initial enrollment period and do not qualify for a SEP, they will face a financial penalty when they get around to signing up. They will be charged the penalty amount each month for twice the number of years they delayed enrollment.

For instance: If a person waits 1 year past the initial enrollment period, they will pay a monthly penalty for 2 years. If they wait 2 years to sign up, they will pay the penalty for 4 years.

If a person fails to enroll in Medicare Part B during the initial enrollment period and if they do not qualify for a SEP, they can expect their monthly Part B premium to increase 10% for each 12-month period of delayed enrollment. There is no time limit on this penalty. A delay in Part B enrollment means they may be charged a monthly penalty for so long as they have Medicare. The longer the delay, the higher the penalty will be.

Part D is the portion of Medicare that covers prescriptions. Not enrolling in part D coverage may also subject a person to penalties. There may be a penalty amount added to a monthly premium if there is any continuous period of 63 days or more after the initial enrollment period, when one of the following is in place:

• A Medicare Advantage Plan (Part C) or other Medicare plan that offers Medicare drug prescription coverage, OR
• Creditable prescription drug coverage.

The amount of the penalty depends on how long the person went without Medicare prescription coverage.

Medicare calculates the penalty by multiplying 1% of the National Base Beneficiary Premium by the number of full months the person went without either Medicare Part D coverage or a creditable prescription plan. The calculated penalty is then rounded up or down to the nearest $.10. This penalty is a permanent cost that is added to a monthly premium. The National Base Beneficiary Premium may change from year to year and the penalty will change with it.