Should I Enroll in Medicare When I’m First Eligible?

You may see phrases like “Medicare penalty” or “late-enrollment penalty” while researching the Medicare program. If you don’t sign up for certain parts of Medicare at the proper time, these penalties may apply to you.

Most people become eligible for Medicare when they turn 65. Your Initial Enrollment Period (IEP) starts three months before the month of your 65th birthday, includes your birth month, and lasts for three months after it. If your birthday is on the first of a month, your IEP starts and ends one month earlier.

So, if you don’t enroll in Medicare when you’re first eligible, what’s the damage? The penalties differ depending on which part of Medicare you’re enrolling in.

Part A

If you’re collecting Social Security or Railroad Retirement Board (RRB) benefits, you’ll be automatically enrolled in Medicare Part A and don’t need to worry about enrollment penalties. If you delay Social Security benefits past age 65, you’ll need to sign up for Original Medicare yourself or find a local licensed insurance agent to help.

Most people pay no Part A premium if they or a spouse paid Medicare taxes for at least 40 quarters (10 years).

The penalty

If you have to pay a premium for Part A and you didn’t enroll during your IEP, your monthly premium may go up 10 percent for twice the number of years you could have been enrolled. For example, if you could have signed up at 65 but waited until 69 (four years), the penalty would last for eight years.

To avoid a Part A penalty, apply for Medicare online or visit your local Social Security office during your IEP if you don’t already receive Social Security or RRB benefits.

Part B

Just like Part A, if you’re collecting Social Security or RRB benefits when you turn 65, you’ll be automatically enrolled in Part B. You can turn down Part B at that time by contacting Social Security or following the instructions in your Medicare welcome packet. However, you should only do this if you’re still covered by a qualified group health plan through your or your spouse’s current employer.

The penalty

If you don’t enroll in Part B during your IEP and don’t have qualified group health plan coverage, your monthly premium may rise 10 percent for each full 12-month period you could have had Part B but didn’t. If you waited 24 months (two years), you could pay a 20 percent penalty on top of your monthly premium for as long as you have Part B. If you drop Part B and sign up again later, you may still have the penalty.

If you don’t sign up when you’re first eligible and don’t qualify for a Special Enrollment Period (below), you may have to wait for the General Enrollment Period, January 1 to March 31. Your coverage then starts the month after you sign up.

Part D

If you go without creditable prescription drug coverage for any continuous period of 63 days or more after your IEP, you may owe a penalty when you eventually join a drug plan. Creditable coverage can include drug coverage from a current or former employer or union, TRICARE, or VA benefits.

The penalty

The Part D penalty is 1 percent of the “national base beneficiary premium” for each full month you went without creditable coverage. For example, if you went 25 months without coverage, your penalty would be 25 percent of that national base premium, rounded to the nearest $.10, added to your monthly premium. The national base beneficiary premium can change each year, so the penalty can change with it.

To avoid a Part D penalty, join a Medicare drug plan during your IEP so you don’t go 63 days or more in a row without creditable drug coverage.

Special Enrollment Periods

The common theme in avoiding a penalty is to get coverage during your IEP. But some exceptions let you delay enrollment without a penalty.

If you’re covered by a group health plan based on your or your spouse’s current employment, you have a Special Enrollment Period (SEP) to sign up for Parts A and B any time while you or your spouse is still working. You also have an eight-month SEP that begins the month after the employment or the group coverage ends, whichever comes first.

Extra Help and Appeals

If you have limited income or resources, your state may help you pay for Original Medicare costs, and you can apply for Extra Help with Part D costs.

If you disagree with a Part D penalty, you can ask for a reconsideration. Your drug plan will explain the process. You generally must ask within 60 days of the letter telling you about the penalty, and you should include proof that you had creditable coverage.

Nobody wants the first time they hear about Medicare penalties to be when they’re paying them. Knowing what causes them is an important step in avoiding them.

Read more: Medicare.gov, Avoid late enrollment penalties

Want help with your situation? Request a plan review or call a licensed insurance agent at (832) 734-6825 (TTY 711). There’s no cost for my help and no obligation.