How Long Does the Medicare Part B Penalty Last?
The Medicare Part B penalty will last the rest of your life, or as long as you have Medicare. There is generally no way out of paying the penalty if you meet the requirements for it. It’s important to sign up for Medicare as soon as you are eligible to avoid having to pay the penalty. The amount you must pay will grow the longer you hold off enrolling.
Medicare Lifetime Late Enrollment Penalty
The Part B late enrollment penalty will last the rest of your life, and it can quickly become a major expense. The cost of your premium will rise by 10% for every 12-month period that you are not enrolled in Medicare.
Once you have enrolled, the increase applies every month that you pay your premium. Even if you were to wait just two years, the change could be dramatic.
The Part B premium for 2022 was $170.10. Waiting two years would increase it by 20% to $204.12. So, over the course of a year, you would end up paying over $400 more for Part B coverage than a beneficiary who enrolled on time would pay.
One of the few ways to avoid the penalty other than signing up on time would be if you qualified to enroll during a special enrollment period.
- You were on Medicaid but are no longer eligible.
- You were in jail and were released.
- You just moved out of an institution like a skilled nursing facility.
Is There a Cap on Medicare Penalties?
Medicare Part B Penalty
There is no cap on the Part B penalty, and this can be damaging to your finances in retirement given the rate at which it rises. Within 10 years of waiting, your Part B monthly costs will have doubled due to the penalty.
There is typically no way out of paying the penalty once you have met the requirements for it. As long as you have Medicare, you will be paying more than other beneficiaries.
Medicare Part D Penalty
Part D prescription drug plans, which are sold by private insurers, also come with a late enrollment penalty if you don’t enroll when first eligible. But it is a bit more complex than the Part B penalty.
According to the U.S. Centers for Medicare & Medicaid Services, you will owe a Part D penalty if you go 63 or more days in a row without drug coverage at any point after you were first eligible to enroll.
Your penalty is determined by taking the national base beneficiary premium (essentially the average premium price across the country) and multiplying 1% of it by the number of months that you didn’t have coverage.
There are some situations where you can have other types of coverage and avoid the penalty, like if you have creditable prescription drug coverage that covers at least the same things a Part D plan would.
Calculating Lifetime Penalty Fees
Calculating your Part B penalty is fairly straightforward. You simply add 10% to the cost of your monthly premium for each year-long period you didn’t have Medicare. It’s simple to get a snapshot of what you will have to pay each month.
- Determine how many 12-month periods you haven’t had Part B since you first became eligible.
- Increase the cost of your premium by 10% for each 12-month period.
To calculate your Part D penalty, you will need to know what the national base beneficiary premium is. You then take 1% of that figure and multiply it by the number of full months that you didn’t have drug coverage.
The number you get will be the penalty that is added onto your premium.
Importance of Enrolling in Medicare on Time
When you first become eligible for Medicare, it is very important that you enroll on time. Since late enrollment penalties have no cap and last the rest of your life, they can quickly become major expenses for you.
For Part D plans, your penalty can fluctuate year-to-year even after you have coverage since the base beneficiary premium can change.
Many Americans retire expecting to spend a certain amount on health care. Penalties can increase that number dramatically and alter the standard of living you were hoping to achieve in retirement.
For most Americans, it makes sense to switch over to Medicare once they become eligible. Remember that the decision to wait and be penalized typically cannot be undone. Once your premiums have risen due to penalties, they will not come back down.
4 Cited Research Articles
- U.S. Centers for Medicare & Medicaid Services. (n.d.). Part B Late Enrollment Penalty. Retrieved from https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-late-enrollment-penalty
- U.S. Centers for Medicare & Medicaid Services. (n.d.). Part D Late Enrollment Penalty. Retrieved from https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty
- U.S. Centers for Medicare & Medicaid Services. (n.d.). Special Circumstances (Special Enrollment Period). Retrieved from https://www.medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/special-circumstances-special-enrollment-periods
- U.S. Centers for Medicare & Medicaid Services. (n.d.). What is Credible Coverage? Retrieved from https://www.cms.gov/medicare/prescription-drug-coverage/creditablecoverage/downloads/whatiscreditablecoverage.pdf