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Medicare Part B & Part D Enrollment Penalties to be Aware of

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Those turning 65 are eligible for Medicare Coverage, this is called your Initial Enrollment Period. This period lasts seven months, starting 3 months before your 65th birthday, and 3 months after the month you turn 65. 

Your coverage start date depends on the month you signed up, and coverage always starts on the first of the month.

If you do not enroll in Medicare Part A or Hospital Insurance when you turn 65 there is a 10 percent penalty that will be applied to the premium, if you pay a monthly premium for your Medicare Part A. 

Most people qualify for premium-free Part A coverage however those that did not pay Medicare taxes will have to pay a monthly premium for coverage. 

For each year you go without coverage, starting the first month you become eligible for Medicare, you will be charged a 10% penalty fee.

In this article, we’ll provide a list of questions and answers that will help guide you through Medicare B and Medicare Part D penalty charges. With these tips, you’ll have a better understanding of what to expect with Medicare enrollment.

Medicare Part B:

If you do not sign up for Medicare on time you will have to pay a 10% surcharge on Medicare Part B premiums.

The longer you go without paying your Medicare Part B coverage the penalty will continue to increase. To prevent having to pay a penalty it is important you sign up for Medicare when you’re first eligible.

1. What will happen when I leave my employer after turning 65 years old?

You will have the opportunity to enroll during the Special Enrollment Period and you get 8 months during SEP to enroll when you leave your job after age 65.

By signing up during SEP you will not have to pay Medicare Part B premium surcharges.

You will also be eligible to sign up for Medicare Part  B if you were once covered under your spouse’s employer-provided group health insurance coverage.

2. How can I avoid the Medicare Part B penalty?

Enroll in Medicare Part B coverage during your Initial Enrollment Period (IEP) or if it applies to you during your Special Enrollment Period (SEP). 

As a reminder: The longer you wait to sign up for Part B coverage, the more the penalty continues to increase. 

3. How do I pay the Medicare Part B penalty?

Any late enrollment penalties that you receive will be added to your monthly Part B premium for as long as you remain in the program. 

For example, if you signed up five years after your deadline, you’d always pay 50 percent more for your Part B coverage than if you’d sign up on time. 

4. When does the Medicare Part B penalty not apply?

If you miss your initial enrollment deadline but sign up during the next General Enrollment Period, the penalty will not apply if less than a 12-month period. 

Coverage goes into effect on July 1st when you enroll during the General Enrollment Period. 

For example, if your Initial Enrollment Period ends on November 30th and you do not enroll until the General Enrollment Period, you will have an eight-month period before your coverage becomes effective on July 1st. Part B penalties will not apply. 

5. If I am still working do I have to sign up for Medicare Part B?

No, as long as you have creditable healthcare through your employer you will not have to enroll in Medicare Part B, nor face a penalty.

6. I’m on Medicaid and didn’t sign up for Medicare Part B, will I be penalized?

If you are on Medicaid, no need to worry about paying penalties because your state will cover those costs. 

If you delayed your Medicare Part B enrollment because of other creditable coverage, you can avoid the penalty by signing up during the Special Enrollment Period. 

Enrolling during the Special Enrollment Period means you are not liable for late penalties.

 

7. Can I get the penalty waived?

If you received bad advice from the federal government regarding your Medicare plan and find yourself without Part B coverage. 

Social Security may be able to waive your Part B penalty and enroll you into Part B or do both things. This works if you would have otherwise had to wait to enroll in the General Enrollment Period.

You may also be able to have your Part B enrollment effective date retroactive. 

It’s important to specify to Social Security what you want to do when you make your request. 

 

8. Can I appeal a Medicare penalty?

It’s important to document as much information as possible about when someone from the government told you not to take Part B.

Include the date and time of your conversation or phone call, and the person you spoke with. Once you gather all of your information you can submit your equitable relief request to your local Social Security office. 

Contact Social Security at 1-800-772-1213 or check www.ssa.gov to find the mailing address of your local Social Security office.

 

9. What happens if I don't pay enough Medicare payroll taxes?

If you don’t sign up for Part B coverage because you thought you hadn’t paid enough Medicare payroll taxes to “qualify”, be aware that earning 40 credits through paying those taxes only ensures that, after age 65 you don’t pay monthly premiums for Medicare Part A (hospital coverage).

The number of years you’d have had to pay Medicare taxes is 10 years.

Medicare Part D:

10. Will I have to pay a Medicare Part D penalty if I don’t enroll in insurance coverage?

Generally, you will not have to pay a Medicare Part D penalty if you have creditable drug coverage (coverage that’s similar in value to Medicare Part D) or if you qualify for Extra Help. 

If you don’t join a Medicare drug plan when you first sign up for Medicare, you will pay an extra 1% for each month (12% a year), or go 63 days or more without creditable drug coverage.

Keep in mind you may pay a higher premium for Medicare Part D depending on your income. After signing up for a Medicare drug plan, the plan will tell you if you have to pay a penalty and what your premium will be each month.

11. How is the Medicare Part D penalty calculated?

There are two factors determined in the calculation of the Medicare Part D penalty: 

    • The number of months you went without proper medication coverage before enrolling in Part D.
    • The amount of Medicare’s current “national base beneficiary premium.

Medicare calculates this amount using a complex formula derived from the average amount insurance companies expect to spend on their plans in a given year. 

The Centers for Medicare & Medicaid Services (CMS) then uses that information to calculate the late enrollment penalty.

 

12. What if I already have a Medicare Part D Prescription Drug coverage plan?

If your current Medicare Part D plan is considered “creditable” stick with it. Your plan is considered “creditable coverage” if it pays out as much as Medicare plans do. 

Creditable coverage can be through a current or former employer, retiree coverage, or labor union group health plan. 

The following entities also offer creditable coverage: 

    • Federal Employee Health Benefits (FEHB) Program
    • Veterans Benefits
    • TRICARE (Military Health Benefits)
    • Civilian Health and Medical Program of the U.S. Department of Veterans Affairs (CHAMPVA)
    • Indian Health Service

13. What happens when my employer-based creditable coverage comes to an end, do I have to pay a penalty?

If your employer plan comes to an end or you drop your Medicare Part D plan after the initial enrollment window closes, you can avoid the late enrollment penalty. 

When your employer coverage ends, you enter a 63-day special enrollment period and during that time you can sign up for a Medicare Part D plan and avoid a late enrollment penalty.

What to Keep in Mind about Medicare Enrollment

Enrolling in Medicare and being faced with a penalty can be a daunting experience. It is important to enroll during your Initial Enrollment Period once you become eligible on your 65th birthday and make necessary changes if need be. 

To avoid Medicare penalties, Open Enrollment starts on October 15th and through December 7th.

This time period is the perfect time to make changes to your current Original Medicare plan, enroll in Medigap, enroll in a Medicare Advantage plan, or enroll in various parts of Medicare. 

For further information, and eligibility, process your Medicare enrollment visit medicare.gov or by phone at 1-800-MEDICARE (1-800-633-4227), TTY users can call 1-877-486-2048.

Shelia Benson

Shelia Benson was born and raised in Las Vegas, Nevada. She comes from a family of insurance professionals and has 12 years of experience in the insurance industry as a licensed agent and is also certified in Medicare. It's her passion to be of service to consumers turning 65 or coming onto Medicare for the first time. During her free time, she loves to spend time with family and her dog, working out, hiking, trying out new restaurants, and going to concerts. Shelia's goal is to educate the Medicare eligible about how Medicare works.

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