Are you always running late? I’d advise against it when it comes to signing up for Medicare. You could get stuck paying Medicare Part A and Part B penalties for years to come, in some cases as long as you have Medicare.

When to Sign Up for Medicare

It’s important not to miss your Initial Enrollment Period. For most people, that happens when they turn 65. They can sign up three months before their birth month and up to three months after their birth month, giving them a seven month window of opportunity. For people who continue working past 65 and decide to hold onto their employer’s group health plan, they can wait to sign up for Medicare until they leave their job or their health coverage ends, whichever comes first. That starts an eight month enrollment period. After that, any sign up will be considered late.

People under 65 can sign up for Medicare too but only if they have qualifying disabilities and medical conditions. People on Social Security Disability Insurance, including those with amyotrophic lateral sclerosis (ALS), are automatically enrolled in Medicare. Because they are automatically enrolled, they never sign up late.

Medicare for people with end-stage renal disease (ESRD) is a whole other animal. Enrollment periods vary based on when they start dialysis or have a kidney transplant. Coverage in this case can even be retroactive. For these reasons, late penalties do not apply to people on ESRD Medicare.

Part A Penalties

Most people get their Part A premiums for free based on how much they paid into the system. To qualify for premium-free Part A you (or our spouse) need to have worked 40 quarters (10 years) in Medicare-taxed employment. If your premiums are free, no matter when you sign up, you won’t pay any late penalties. After all, any number times zero is zero!

According to the Centers for Medicare & Medicaid Services though, 99% of people get it for free. That leaves 1% of Medicare beneficiaries to worry about late fees when they sign up late.

Part A Penalty
How Much It Costs: 10% multiplied by your current premium
How Long the Penalty Lasts: Twice the # of years you were late signing up

THE MATH: If you were 2 years (24 months) late signing up, you would pay 10% on top of your premiums and that penalty would last four years (2 x 2 years).

Part B Penalties

Everyone pays Part B premiums. Unfortunately, the penalties for late Part B sign up are far more severe.

Part B premiums are based on your income from two years ago. The more you earn, the more you pay. Because the late penalties are calculated using your monthly premium, higher earners pay more in late penalties.

The biggest issue is that these penalties can last the rest of your life! That can add up to big money over the years.

Part B Penalty
How Much It Costs: 10% added to your current premium for every year (12 month period) you were late signing up*
How Long the Penalty Lasts: As long as you have Medicare

THE MATH: If you were 2 years (24 months) late signing up, you would pay 20% on top of your premiums (10% x 2 years), etc, and that penalty would last as long as you have Medicare.

HELPFUL TIP: The late penalty is based on a 12 month period. If you are 11 months late in signing up, you would not face a penalty. Likewise, if you were 23 months late, you would only be penalized for one year, not two, etc.

How to Get Out of Part A and Part B Late Penalties

Most people who end up with late penalties are stuck with them for the long haul. There are only a few escape routes.

Medicare Savings Programs: If you can barely afford your current premiums, how can you afford an extra late fee? If you qualify for one of these subsidy programs, your late penalties will be forgiven. In 2020, these programs paid Part A premiums for over 700,000 people and Part B premiums for more than 10 million.

ESRD Medicare: If you already had a Medicare late penalty (e.g., you signed up after your Initial Enrollment Period based on age) but later developed ESRD, your penalties would be erased once you enroll in ESRD Medicare.

 

2022 Medicare Parts A & B Premiums and Deductibles/2022 Medicare Part D Income-Related Monthly Adjustment Amounts. CMS.gov. https://www.cms.gov/newsroom/fact-sheets/2022-medicare-parts-b-premiums-and-deductibles2022-medicare-part-d-income-related-monthly-adjustment

State Payment of Medicare Premiums. (2020). CMS.gov. https://www.cms.gov/medicare-medicaid-coordination/medicare-medicaid-coordination-office/state-payment-medicare-premiums