Medicare can be a complex program to navigate. Depending on a senior’s health insurance coverage and unique medical needs, they have the option to enroll in Medicare Part A, Part B and Part D during their Initial Enrollment Period or delay their enrollment to a later date. In some cases, delaying makes sense, but this decision must be handled carefully, or it could result in late enrollment penalties.
When Seniors Are First Eligible for Medicare
The Centers for Medicare and Medicaid Services (CMS) set very specific guidelines and windows for when seniors can enroll in certain parts of Medicare. The first such window is known as the Initial Enrollment Period (IEP). This seven-month window begins three months before one’s 65th birthday, includes one’s birthday month and ends three months later. People who have worked and paid Medicare taxes for at least 10 years are automatically eligible once they reach their IEP.
Seniors who begin receiving Social Security retirement benefits before their Medicare IEP begins will typically be enrolled in both Medicare Part A and Part B automatically. Those who have not yet claimed Social Security benefits will need to go through the Medicare enrollment process with the Social Security Administration.
Enrolling in Medicare Part A
Medicare Part A is known as “hospital insurance.” Most seniors are eligible to receive Medicare Part A without paying any premiums, so it makes sense to enroll and either discontinue your current healthcare coverage or keep it if it works with Part A to reduce your out-of-pocket costs.
Medicare.gov encourages most seniors to enroll in premium-free Part A as soon as they can to avoid gaps in coverage and late enrollment penalties. Seniors who do not qualify for premium-free Part A and those who are still receiving health insurance coverage through their employer (or their spouse’s employer) may elect to delay enrollment. However, it’s important to research this decision carefully beforehand to ensure minimized costs and maximized coverage.
Part A Late Enrollment Penalties
For seniors who still have health coverage through an employer (or their spouse’s employer), the size of the employer determines whether Medicare enrollment can be deferred without incurring a penalty. Those with group health plan coverage through employment can delay both Medicare Parts A and B without having to pay late enrollment penalties.
A senior who doesn’t qualify for premium-free Part A will have to pay either a $240 or $437 monthly premium, depending on the number of qualifying quarters they worked over their lifetime. Those who do not qualify for premium-free Part A and elect to delay their enrollment are subject to late enrollment penalties. The Part A late enrollment penalty increases one’s premium by 10 percent. This elevated premium applies for twice the number of years a senior could have had Part A but didn’t sign up. The exceptions to this rule are if a senior meets certain conditions that qualify them for a Special Enrollment Period (SEP) or financial assistance with covering premium costs.
Part B Enrollment
Part B is referred to as “medical insurance.” Unlike Part A, seniors more frequently choose to delay enrolling in Part B because it’s a paid benefit. Premium amounts vary based on a senior’s income and when they enrolled.
Again, some seniors are able to defer their Part B enrollment depending on the nature of their current health coverage from other sources.
Part B Late Enrollment Penalties
The standard Part B premium in 2019 is $135.50. According to Medicare.gov, a senior’s monthly premium for Part B may go up 10 percent of the standard premium for each full 12-month period that they could have had Part B but didn’t sign up for it. Gaps in coverage may be substantial because seniors must typically wait until a General Enrollment Period (January 1 to March 31 each year) when they eventually choose to enroll. This penalty applies for as long as a senior has Part B.
If a senior who has delayed enrolling qualifies for a Special Enrollment Period, then they are typically exempt from the Part B late enrollment penalty. Those with low income and limited assets may qualify for financial assistance with their Medicare premiums.
Enrollment in a Prescription Drug Coverage Plan
While most seniors regularly take several prescription medications, some only take a few or none at all. For this reason, some Medicare beneficiaries choose not to enroll in optional prescription drug coverage when they first become eligible. However, unless a senior has comparable drug coverage through another source, such as an employer or a union, then they must pay a late enrollment penalty if they choose to sign up for a Part D plan later on.
Part D Late Enrollment Penalties
A senior who wishes to enroll later may have to pay a penalty if, for any continuous period of 63 days or more after their Initial Enrollment Period ends, they went without one of the following:
- A Medicare Prescription Drug Plan (Part D)
- A Medicare Advantage Plan (Part C) like an HMO or PPO
- Another Medicare health plan that offers Medicare prescription drug coverage
- Creditable prescription drug coverage (such as through an employer or union)
The Medicare prescription drug coverage late enrollment penalty is more complex to calculate than for Parts A and B. First, Medicare takes the “national base beneficiary premium” ($33.19 in 2019) and multiplies it by the number of full months a senior went without Part D or other creditable coverage. The resulting number is then rounded to the nearest 10 cents and added to the senior’s monthly Part D premium.
Because the national base beneficiary premium is subject to change each year, it is possible that one’s Part D premiums may also fluctuate. This penalty will apply for as long as a senior is enrolled in a Part D program.
If a senior enrolls late but qualifies for a Special Enrollment period or the Extra Help program, then they will not be subject to the Part D late enrollment penalty.
Avoiding Gaps in Coverage and Minimizing Costs
These penalties may seem minor, but even small mistakes can add up quickly, especially for seniors who are living on a fixed income. When it comes to navigating Medicare and other health insurance matters, it’s best not to go it alone or let questions go unanswered.
For assistance with initial enrollment, evaluating and comparing all Medicare coverage options and applying for Medicare Savings Programs, contact your local Area Agency on Aging (AAA). Each AAA offers information, education and counseling through a State Health Insurance Assistance Program (SHIP) run by knowledgeable volunteers.
Use the directory to find your local Area Agency on Aging »
Sources: Fact Sheet: Deciding Whether to Enroll in Medicare Part A and Part B When You Turn 65 (https://www.cms.gov/Outreach-and-Education/Find-Your-Provider-Type/Employers-and-Unions/FS3-Enroll-in-Part-A-and-B.pdf); Part D late enrollment penalty (https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty)