When you turn 65, you’re eligible to enroll in Medicare. Most people get Part A (hospital insurance) for free. However, Part B (medical insurance), Part D (prescription drug coverage), and Medigap (supplemental coverage) aren’t free.
If you or your spouse are covered under another plan, you may be wondering if you have to enroll, when you should, and which parts to enroll in. If you plan to enroll in Parts A and B (or already are), you may be wondering if and when you should get a Part D prescription drug plan, a Medigap policy, or if you should bundle your Medicare coverage in a Medicare Advantage plan (Part C).
Learn how Medicare late enrollment penalties work, which Medicare parts they apply to, and how to avoid paying them.
- You’re only eligible to enroll in the different parts of Medicare during designated annual enrollment periods.
- If you miss enrolling during your initial enrollment period, you could face late enrollment penalties for Parts A, B, and D.
- Enrollment penalties for Parts B and D are added to your premium for life and increase the longer you go without coverage.
- If you have coverage through your employer (or your spouse’s), you may qualify for a special enrollment period during which you can sign up for Medicare without penalty.
Medicare coverage is delivered in a few different ways, via “parts,” specifically:
- Part A: Hospital insurance, which covers inpatient hospital care, hospice care, and short-term home health and skilled nursing care. Part A and Part B together are referred to as “Original Medicare.”
- Part B: Medical insurance, which covers medically necessary services, such as doctor’s visits, diagnostic services and treatments, and preventive services.
- Part C: Also known as Medicare Advantage or MA plans, Part C is an optional way to receive your Part A and B benefits. Both are required to get a Medicare Advantage plan. Many MA plans include prescription drug coverage, along with some vision, hearing, and dental services.
- Part D: Prescription drug coverage; these plans are optional if you have Part A or Part B. Alternately, you can enroll in a Medicare Advantage plan to receive prescription drug benefits.
- Medigap: Also referred to as Medicare supplement plans or supplement insurance, Medigap helps pay copays, coinsurance, and deductibles for an additional premium.
What Are Medicare Late Enrollment Penalties?
There are several reasons to enroll in Medicare during your initial enrollment period, such as avoiding a coverage gap. However, one of the most compelling reasons is to avoid late enrollment penalties.
Medicare late enrollment penalties aren’t one-time fees, and some are permanently affixed to your premium; plus, Part A (if you’re not eligible for premium-free Part A), Part B, and Part D all have them. And while Medigap doesn’t have a late enrollment penalty, per se, you could end up paying a lot more or even be denied a policy if you want one after your Medigap open enrollment period expires.
Keep in mind that you can’t just enroll in the different parts of Medicare whenever you want. There are specific enrollment periods, including but not limited to:
- Initial enrollment: Your initial enrollment period begins three months before the month in which you turn 65 and ends three months after; it lasts a total of seven months.
- Special enrollment: This is another initial enrollment period triggered by special circumstances, such as losing your current coverage or moving. If you qualify for a special enrollment period, you may be able to sign up for Medicare after the initial enrollment period without facing penalties.
- General enrollment: If you didn’t sign up during your initial enrollment period, you can enroll in Medicare during the general enrollment period from January 1 to March 31 each year.
- Open enrollment: You can’t sign up for Part B during Medicare’s open enrollment period, but you can sign up for Part D prescription drug coverage if you didn’t during your initial enrollment period. Open enrollment is from October 15 to December 7 each year.
- Medigap open enrollment: This period begins the first month you have Part B (and are at least 65) and lasts for six months. This is the only period when insurers cannot rate your policy (charge an additional premium) or deny you one due to health problems or preexisting conditions.
Part A Late Enrollment
Part A is the hospital insurance portion of Medicare. If you’re eligible for premium-free Medicare Part A, you can enroll at any time without penalty. However, if you’re required to pay for Part A, you could face a late enrollment penalty if you don’t enroll when you’re first eligible and if you don’t qualify for a special enrollment period.
If you receive Social Security benefits at least four months before you turn 65, you’ll be automatically enrolled in both Parts A and B of Medicare.
In many cases, if a health insurance plan currently covers you through you or your spouse’s work, you can enroll in Part A (and Part B) after your initial enrollment period ends. You can do so at any time before you lose your current coverage or within eight months after the month in which you lose that coverage or quit your job, whichever occurs first.
If you don’t qualify for a special enrollment period, you’ll pay a 10% premium increase penalty that lasts for twice the number of years you went without coverage. So if you went without coverage for three years, you’d have to pay the penalty (on top of your regular premium) for six years.
Part B Late Enrollment
Part B of Medicare is the portion that covers medical insurance: think doctor’s visits and diagnostic and preventive services. If you don’t sign up when you’re first eligible and don’t have other health insurance coverage, you will probably face a lifetime late enrollment penalty. This means your Part B premium can increase 10% for each 12-month period you went without coverage for as long as you have Part B.
If you have other health insurance—through work or your spouse, for example—you may qualify for a special enrollment period and be able to delay signing up for Part B without penalty.
If you have coverage through COBRA, you won’t be eligible for a special enrollment period once that coverage ends. To avoid a gap in coverage and the late enrollment penalty, sign up for Medicare as soon as you’re eligible.
However, if you work for an employer with fewer than 20 employees or where not everyone has health coverage, you may still want to sign up during your initial enrollment period. Ask if your insurance is “employer group health plan coverage”; if it’s not, you should sign up for Part B to avoid the penalty.
Part C Late Enrollment
There’s no late enrollment penalty for Part C, also called Medicare Advantage plans. Part C is a plan that lets you receive your Parts A and B benefits. It often incorporates prescription drug coverage as well. You can enroll in a Medicare Advantage plan during the Medicare open enrollment each year, as long as you have Parts A and B.
Even though there’s no late enrollment penalty for Part C, Part A and B are both required to sign up for a plan. So if you sign up for those plans late, you’ll still face a penalty.
Part D Late Enrollment
You’re eligible to enroll in a Part D prescription drug plan as soon as you enroll in Part A or Part B. Alternately, you can get drug coverage via a Medicare Advantage plan, which is also known as Part C.
If you have a Medicare Advantage plan with prescription drug coverage, you can later switch to original Medicare (Parts A and B) and a Part D prescription drug plan during the annual open enrollment period (or the Medicare Advantage open enrollment period)—without penalty.
You could face a lifetime late enrollment penalty for a Part D plan if:
- You don’t get prescription drug coverage via Part D or Medicare Advantage
- You don’t have “creditable” drug coverage (prescription coverage through some employers, for instance)
Medicare doesn’t want you to be without drug coverage that doesn’t pay, on average, what a Medicare-approved drug plan would pay. This is what is meant by “creditable” coverage. If you go without creditable drug coverage for 63 or more days in a row, a late enrollment penalty will be permanently affixed to your Part D premium once you do enroll. The penalty increases the longer you go without coverage and is calculated as follows:
1% x the “national base beneficiary premium” x the number of months you didn’t have creditable coverage (rounded to the nearest $0.10)
This “national base beneficiary premium” is $33.37 for 2022 ($33.06 for 2021). For example, if you went 48 months without creditable drug coverage, the amount added to your monthly Part D premium would be $16.00 (which is 1% x $33.37 x 48, rounded to the nearest $0.10, in 2022).
Medigap Late Enrollment
Medigap doesn’t have an explicit “late enrollment penalty,” but there’s only one period of time during which insurance companies won’t consider your health when pricing your Medigap policy. That period is the Medigap open enrollment period, and it’s triggered on the first day of the month in which you are at least 65 and are enrolled in Part B.
It’s illegal for a company to sell you a Medigap policy if you have a Medicare Advantage plan unless you’re switching back to Original Medicare.
You have six months until the period expires from the first month you’re enrolled in Part B (and also have Part A). If you choose to wait and purchase Medigap later, you could pay a much higher rate or be denied coverage altogether.
The Bottom Line
Determining when to enroll in Medicare can be tricky. However, it makes sense to sign up as soon as you’re eligible. If you do have other coverage, make sure your prescription drug coverage is considered “creditable” according to Medicare’s standards so you can avoid the late enrollment penalty for Part D. To help decide based on your circumstances, consult the Medicare sign-up tool.