Lesson 6: Medicare Penalties

When you become of Medicare age, the Government may enforce late enrollment penalties (fee) if you don't sign up for Medicare during your Initial Enrollment Period (IEP). These penalties are not one-time charges, but will be added to your monthly premiums for the life of your plan's coverage (with the exception of Part A).

These penalties are primarily enforced for Medicare Part B and Part D plans, but can also be applied to Part A plans for those that pay a Part A premium. For those 65 or older and still working, you may be exempt from Part A and B penalties if you are participating in a group insurance plan (learn more about working past age 65).

If you are are required to pay a monthly premium for Medicare Part A, it's important to sign up for Part A when you become eligible. If you don't, your Part A monthly premium may go up by 10%. This penalty will be applied to your premiums twice the number of years you waited to sign up. For example, if you waited two years to sign up for Medicare Part A (once you became eligible), you'll have to pay the penalty for 4 years. However, if you meet certain conditions, you can avoid late penalties by signing up under a Special Enrollment Period.

If you failed to sign up for Medicare Part B when first eligible, you will pay an extra 10% on your monthly premium for each year you didn't sign up. This amount may also increase depending on your income. In general, you won't be required to pay a penalty if you qualify for a Special Enrollment Period.

Learn more about Special Enrollment Periods in our blog.

Part D drug coverage is optional, but there are penalties involved if you don't sign up during specific time periods:

• If you don't sign up for Part D coverage during your Initial Enrollment Period, and have not had any prescription drug coverage for 63 or more days after your IEP has expired, you may be required to pay a monthly penalty once you sign up for Part D coverage.
• This penalty will generally last for as long as you have Part D coverage.
• The penalty is calculated by multiplying 1% of the "national base beneficiary premium" ($36.78) times the number of full months you did not have credible drug coverage. The monthly penalty is rounded to the nearest $.10 and added to your monthly premium.