Signing up for Medicare when you turn 65 isn’t technically mandatory; however, there are significant penalties for delaying Medicare enrollment. Unless you had another form of coverage in the meantime, you could face permanent late enrollment penalties for Part B when you sign up later. It’s also important to note that, if you are over 65, there aren’t many other affordable options for health insurance. Each part of Medicare treats penalties differently, but the message is the same: be covered or pay a premium later.
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Medicare Part A penalty
If you don’t qualify for premium-free Part A, you’ll be subject to a late-penalty premium when you do sign up. This is, of course, unless you had other qualifying coverage in the meantime. The penalty is 10% of the current Part A monthly payment. You’ll pay the penalty for twice the number of years you were eligible for Part A but didn’t sign up.
Let’s say that you became eligible for Part A in 2013 and were no longer covered by an employer-provided plan. If you waited until 2016 to enroll in Part A, you’d pay an extra 10% each month for six years.
If you need help identifying your 7-month Initial Eligibility Period, visit our Initial Enrollment Period Finder.
Medicare Part B penalty
If you don’t sign up for Part B during your IEP, you’ll have to pay a late penalty every month. Your monthly Part B premium will go up 10% for each full year that you were eligible. If you need help determining when you should sign up for Medicare, visit our article ”When can I sign up for Medicare?”
If you delayed enrollment by five full years, your monthly payment would permanently increase by 50%. (However, if you missed your deadline by 4 years and 364 days, your monthly payment would only increase by 40%. This penalty is always calculated using full calendar years.)
As you can see, these Part B penalties can add up very quickly. For this reason, we recommend that you enroll for Part B before your enrollment period lapses.
Medicare Part D penalty
One of the most common mistakes new retirees make is to assume they don’t need a Part D plan. Just because you have Parts A and B does not mean you are fully covered; Original Medicare does not include prescription drug coverage for medications you take on a regular basis.
You may have to pay a late enrollment penalty if you went without creditable prescription drug coverage for more than 63 continuous days after your IEP.
The penalty premium is 1% of the average monthly prescription drug premium multiplied by the number of months you went without creditable coverage. Like Part B, this penalty is tacked onto the regular monthly payment, and you’ll pay the penalty premium permanently.
For this reason, it is highly advisable that you sign up for a Part D plan during your Initial Enrollment Period even if you are not currently taking any prescription drugs. As you get older, it is very likely that you will need prescription drug coverage. In the United States, 39% of adults over 65 take five or more prescription drugs every day. If you neglect to enroll in a Part D plan within your Initial Enrollment Period, you could end up paying thousands of dollars more for those prescriptions than you would have otherwise.
If you are one of the few lucky people over 65 who are not currently taking prescription drugs on a daily basis, we recommend purchasing the most affordable Part D plan available in your area. This keeps your out of pocket costs as low as possible while also protecting you from penalties you would likely incur in the future. When you do begin taking certain prescriptions, you’ll be able to identify the best plan for your needs during that years open enrollment period. You can browse Part D plans available in your area on Renew’s Medicare Marketplace.
- Your initial enrollment period is the 3 months before and 3 months after your 65th birthday month.
- You may be able to sign up later without a penalty if you have coverage through your employer, union, or other creditable source. This is called a Special Enrollment Period.
- There can be penalties for forgoing coverage, some of which apply for the rest of your life.