Keep your out-of-pocket costs lower by avoiding late enrollment penalties. When you’re first eligible for Medicare but choose to delay Part B and/or Part D benefits, you may incur late fees when you sign up after your initial enrollment period has ended. These late fees may last for the duration of your time on Medicare.
Medicare Benefits Solutions
May 4, 2020
When you qualify for Medicare, you’ll likely get premium-free Part A (hospital insurance) based on taxes you paid while working. Enrollment in Part B (medical insurance) will require you to pay a monthly premium. Because Part B is optional, some people consider delaying enrollment. Part D prescription drug coverage is also optional and will require an additional premium. Your reasons to delay enrollment may affect your long-term Part B and Part D costs.
People delay enrollment in Part B and/or Part D for a number of reasons. Some people are relatively healthy when they qualify for Medicare and think they can save money by delaying enrollment. Unfortunately, if you don’t have other insurance and you experience a change in your health, you could be putting your financial security at risk.
Part B provides important benefits. Doctor visits, lab work, preventive care, outpatient procedures, and durable medical equipment are included in Medicare Part B. If you don’t have other insurance coverage and need to see a doctor due to an illness or injury, you would be responsible for the full cost of any medical services you receive.
Some people are tempted to delay enrollment in Part D if they don’t take prescription drugs on a regular basis when are first eligible for Medicare. But, life can be unpredictable. If you are unexpectedly diagnosed with a chronic condition or experience a health event that requires expensive prescription medication, the costs could be high.
If you don’t sign up for Part B when you’re first eligible for Medicare and decide to enroll later on, your monthly premium may increase 10% for each 12-month period you delayed enrollment. In most cases, you’ll have to pay this higher amount every time you pay your premium.
For instance, if you qualify for Medicare in July 2020, but do not enroll in Part B until September 2022, your penalty will be 20% of the standard premium for the remainder of your lifetime.
If you’re still working when you turn 65 and have group insurance through your employer, you might be able to delay enrollment without incurring late fees. If your employer has 20 or more employees and you participate in their group health plan coverage based on current employment, you can delay Part B enrollment. When you leave your job, you will have an 8-month Special Enrollment Period that starts the month after your employment ends or the month after your group health plan insurance ends. You will not have to pay a late enrollment penalty under these circumstances.
Part D prescription drug coverage is optional, but the potentially high cost of prescription drugs compels most Medicare recipients to enroll when they are first eligible. If you don’t enroll in prescription drug coverage during your Initial Enrollment Period and decide to enroll after that period has ended, you may incur late enrollment penalties.
If you do not enroll in Part D through a stand-alone Prescription Drug Plan or a Medicare Advantage plan that includes prescription drug coverage, and do not have other creditable coverage, you may have to pay a late enrollment penalty.
The penalty will be based on the number of months you went without coverage after your initial enrollment period ended. How is the penalty calculated? The number of full months you went without Part D creditable coverage is multiplied by 1% of the national base beneficiary premium, which is $32.74 in 2020. The number is rounded to the nearest $.10. You’ll have to pay the penalty for the remainder of your lifetime.
If you have creditable coverage through your employer, you can delay Part D enrollment without incurring a late enrollment penalty when you choose to sign up later. What is creditable coverage? It’s group health insurance that is equivalent to Medicare’s standard prescription drug coverage.
If you have creditable coverage through your employer or union, you can keep it and delay enrollment in Part D. When your employment ends, you will be eligible for a Special Enrollment Period. When your employer-sponsored coverage ends, you will have two full months to join a Prescription Drug Plan or a Medicare Advantage plan that includes prescription drug coverage.
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