The only way to avoid Medicare premium penalties is to enroll in a timely manner. Medicare charges a penalty for Part B and Part D enrollees, and some Part A enrollees, if they have a significant gap in their health care coverage. This can happen either because they didn’t enroll when they turned 65 or because they didn’t enroll when they lost their previous coverage.
These enrollment penalties are applied to your monthly premiums and, in some cases, can be a permanent increase. As a result, it’s extremely important to avoid getting hit with a penalty that can last for the rest of your life.
Here’s the basics you need to know — including how much it could cost you. And for additional help navigating Medicare and other retirement matters, consider consulting a financial advisor.
The Medicare program is split up into four sections, or “Parts.” They’re organized around coverage, and you enroll in each part individually.
Medicare Part A is traditional Medicare. This section covers hospital visits, in-patient care and home health care.
Medicare Part B is an expansion on traditional Medicare. This section covers doctor’s visits, outpatient care, medical equipment, and preventative services.
Medicare Part C is otherwise known as Medicare Advantage. With this section, you shop for subsidized private insurance that offers the coverage you would ordinarily receive from Parts A and B.
Medicare Part D is relatively new. It offers prescription drug coverage outside of an inpatient setting.
Most Medicare coverage charges a monthly premium, and all Medicare coverage has out-of-pocket costs such as deductibles and copays. Those costs are typically based on your individual circumstances and the program you choose.
In addition to fixed costs, Medicare also charges a penalty if you delay enrolling. You can trigger these penalties in one of two ways:
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Enrolling significantly after you become eligible, generally by turning 65, or
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If you have third-party health insurance when you become eligible for Medicare, delay enrolling after you no longer have coverage
The main purpose of these penalties is to ensure that you maintain continuous coverage instead of waiting until you are sick to sign up for health insurance. These penalties are applied as an increase to your monthly premiums. Per Medicare’s website, late enrollment penalties:
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Are added to your monthly premium.
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Are not a one-time late fee.
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Are usually charged for as long as you have that type of coverage (for most people, that’s a lifetime penalty). The Part A penalty is different.
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Go up the longer you wait to sign up – they’re based on how long you go without coverage similar to Medicare.
