What You Need to Know About Medicare’s Late Enrollment Penalties
When it’s time to begin considering enrolling in Medicare—whether you’re about to turn 65 years old or experience other specific health issues—it’s important to know that if you don’t sign up when you’re first eligible to receive this benefit, you may face a late enrollment penalty. In some cases, it’s a penalty that becomes part of your premiums long-term.
On average, most people qualify for Medicare Part A when they turn 65 years old.
The penalty amounts and guidelines for assessing them will vary depending on if you’re applying late for Medicare Part A, Part B, or Part D.
Medicare Part A Late Enrollment Penalty
Medicare Part A, commonly referred to as Hospital Insurance, is designed to cover expenses related to inpatient care in a hospital or skilled nursing facility, home health care (such as physical therapy, occupational therapy, and speech-language pathology services), and hospice.
On average, most people qualify for Medicare Part A when they turn 65 years old. However, in cases of disability or when specific health conditions exist (such as end-stage renal disease or amyotrophic lateral sclerosis), you may be eligible to sign up for Part A sooner.
Typically, Part A is provided free of charge if you or your spouse paid Medicare taxes for a specified length of time while still employed. This is why it’s often referred to as “premium-free Part A.”
However, if you don’t meet the necessary qualifications and have to pay for Part A—the standard monthly 2019 premiums are $437 if you paid Medicare taxes for 29 quarters or less, and $240 if you paid Medicare taxes for 30 to 39 quarters—you may be assessed a 10 percent late enrollment penalty if you don’t sign up when you first become eligible.
As an example, if your premium is $437 and you waited a year to sign up, your new premium amount would be $480.70.
This penalty is applied to your monthly premium amount for two times as long as the number of years you have been eligible to receive Part A but never enrolled.
For example, if you waited one year beyond eligibility to sign up, your penalty is 10 percent and you have to pay this higher amount for two full years. However, if you waited two years beyond your original eligibility date to enroll in Part A, your penalty would be 20 percent and you’d have to pay it for four years—and so on.
If you have Original Medicare, Part D (the Prescription Drug Plan) can be purchased independently to help offset your medication-related expenses.
Medicare Part D Late Enrollment Penalty
If you have Original Medicare, Part D (the Prescription Drug Plan) can be purchased independently to help offset your medication-related expenses. Late enrollments can be assessed under Part D if the initial enrollment period has ended and you have gone 63 consecutive days without one of the following:
- A Medicare Prescription Drug Plan
- A Medicare Advantage Drug Plan
- An alternative Medicare plan providing drug coverage
- Prescription drug coverage through a non-Medicare plan with benefits that pay as much as (if not more than) Medicare drug coverage, also known as “creditable prescription drug coverage”
If a penalty is assessed under Part D, the amount of that penalty is 1 percent of the “national base beneficiary premium” per month for every month that there was no prescription drug coverage, starting with the initial eligibility date.
For example, if you were eligible for coverage on January 1st of 2018 and had no type of prescription coverage and also didn’t apply for Part D until December 2018 during open enrollment, you would have gone 12 months with no drug benefits (because the new policy would not begin until January 1, 2019). Therefore, your penalty would be 12 percent of your base premium.
When calculated, this penalty is rounded to the nearest $0.10 and added to the base monthly premium you’re required to pay. In 2019, this premium is $33.19. So, instead of paying the base rate of $33.19 per month for Medicare Part D in 2019, your monthly costs with the late enrollment penalty would be $37.19.
As with Part B, this penalty also applies “for as long as you have a Medicare drug plan.” And if you pay just the base amount and not the penalty, you can be disenrolled from the drug plan.
To avoid late enrollment penalties across all of the different parts of Medicare, you must sign up when you’re first eligible.
How to Avoid Late Enrollment Penalties
To avoid late enrollment penalties across all of the different parts of Medicare, you must sign up when you’re first eligible. While that may not be an issue with Part A if you qualify for the premium-free plan, the decision to sign up for parts B and D upon eligibility can be a little more complex.
For example, if you are still working and have health insurance coverage through your employer, whether or not you face a potential late enrollment penalty for Part B depends on the number of employees at your company.
Specifically, if your employer’s business has 19 employees or less, you may be subject to a late enrollment penalty if you don’t sign up when eligible. However, if your employer’s company has 20 employees or more, you may be able to delay enrollment without facing a penalty.
There are also special considerations regarding Part B late enrollment penalties based on factors such as:
- Whether your spouse has coverage through work, the size of his or her employer, and when that coverage is due to end
- Whether you’re an active-duty service member who has TRICARE
- Whether you have end-stage renal disease
If your goal is to avoid a late enrollment penalty on Part D (the Prescription Drug Plan), you should either join when you’re first eligible or don’t go more than 63 consecutive days without some type of drug coverage. In the latter situation, be sure to keep records of this other coverage so you can provide them to Medicare if necessary.
If you have been assessed a late enrollment penalty on Plan D but disagree with this decision, you have the right to ask Medicare for reconsideration.
How to Challenge a Late Enrollment Penalty
If you have been assessed a late enrollment penalty on Plan D but disagree with this decision, you have the right to ask Medicare for reconsideration. You’re required to contact the drug plan provider and ask that the reconsideration form be sent to you.
This reconsideration is conducted by an Independent Review Entity and you should have a decision within 90 calendar days of them receiving your request, according to the Centers for Medicare & Medicaid Services (CMS).
How often are these decisions changed or reversed?
The CMS reports that 39,664 total reconsideration requests were closed in 2017. Of these, 17,629 of the original late enrollment penalty decisions were fully reversed and another 2,334 were partially reversed. That’s more than 50 percent.
Out of the remaining 19,701 reconsideration requests that were closed that year, 10,699 were upheld, 8,937 were dismissed, and the final 65 were withdrawn.
You can also contact your State Health Insurance Assistance Program (SHIP) for assistance with your appeal if you’d like. If you’re unsure of how to do this, visit their website, click on the “SHIP Locator” button, and you’ll find contact information for your local SHIP.
If you are assessed a penalty on your premiums for Part A or Part B, your only option is to request help from your state or to apply for a Medicare Savings Program to help cover the premiums.
The four Medicare Savings Programs currently being offered, as well as their income and resource limits (for 2018), are:
|Program Name||Individual Income Limit Per Month||Married Income Limit Per Month Per Couple||Individual Resource Limit||Married Resource Limit Per Couple||Premiums It Can Help Cover|
|Qualified Medicare Beneficiary Program||$1,032||$1,392||$7,560||$11,340||Part A and Part B|
|Specified Low-Income Medicare Beneficiary Program||$1,234||$1,666||$7,560||$11,340||Part B|
|Qualifying Individual Program||$1,386||$1,872||$7,560||$11,340||Part B|
|Qualified Disabled and Working Individuals Program||$4,132||$5,572||$4,000||$6,000||Part A|
The resource limits apply to any cash or stocks and bonds you own as an individual or married couple. They do not apply to your home, furniture, or other personal items.
You’re also entitled to own a burial plot and up to $1,500 in burial expenses without needing to factor them into your resources. If you have one vehicle, its value won’t be taken into consideration. However, if you own more than one, the additional vehicles may be used when calculating the resources you have available.