Individuals who are 65 or older or who receive social security disability benefits are typically eligible for Medicare benefits to help pay for their medical costs. However, if enrollees do not sign up for Medicare when they are initially eligible or when they are losing their coverage from another plan (e.g., when retiring), they may face Medicare late enrollment penalty.
Medicare Part B is responsible for doctors’ services, and for most people it has a monthly premium of $134 in 2018. Some beneficiaries with higher incomes may pay more. When a retiree first becomes eligible for Medicare, they have an Initial Eligibility Period (IEP) to sign up for their benefits that lasts for up to three months after their 65th birthday. During this time, most people automatically are signed up for both Parts A and B of Medicare, but some choose to postpone paying for Medicare Part B’s premiums until a later date.
Sometimes, people are still working and do not plan on enrolling for Medicare until they retire at an older age. If a worker is losing or replacing another plan, like employer or group coverage, they will not be penalized as long as they enroll in Medicare within 8 months of terminating their employment.
For those who delay enrollment, there is a General Enrollment Period (GEP) each year, from January 1 to March 31 to enroll in Medicare Part B. Coverage does not begin until the following July 1. Enrollees may face a late enrollment penalty of 10% for each 12 month period they delayed enrolling in Medicare Part B.
For example, if John Doe was eligible for Medicare on August 1, 2015, and he applies for Medicare Part B in March of 2018, he will pay a late enrollment penalty of 20% because there were two full 12-month periods between his eligibility date and the date he enrolled in Medicare. John Doe will pay that 20% surcharge on his premium for as long as he pays Medicare Part B premiums.
Keep in mind, it is important to enroll in Medicare when you are initially eligible because the late enrollment penalty does not expire, it is continuous and will increase costs significantly over time. The Medicare late enrollment penalty encourages all enrollees to maintain continuous coverage without gaps, which helps keep costs down, ensuring the stability of Medicare for future generations.
To learn about the Medicare Part D late enrollment penalty, click here.