How to Protect Yourself From Medicare Penalties

Whether you read about the late enrollment penalty for Medicare of you experienced it first-hand, it seems a little mind-boggling that the federal government would penalize you for not taking advantage of a service.

If you’re not enrolled, the government isn’t taking on the cost of your coverage. You would think they would welcome such an arrangement and maybe even pay you but no—if you don’t enroll when you’re supposed to, you will owe a penalty.

Clearly, medicare supplement insurance deserves your time and attention. And like any aspect of insurance, there can be a learning curve to discover the ins and outs and what you need for your lifestyle.

Hopefully, this can make the learning curve a little less steep.


See which plans are available where you live:

  • Medicare Advantage (Part C)
  • Medicare Supplement (Medigap)
  • Part D (Prescription Drug)
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We can answer questions such as:

  • What’s Medicare?
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  • How does Medicare work?
  • When can I apply?


When to Enroll

If you’re already collecting Social Security—either retirement or disability benefits, you will automatically be enrolled in Parts A and B. The Part B premium will be deducted from your monthly Social Security benefit check.

If you have to sign up, the first time you can enroll is called your initial enrollment period. This is the time when you should sign up for Parts A and B—also known as Original Medicare. The initial enrollment period normally begins 3 months before the month you turn 65, includes the month you turn 65, and ends 3 months after the month you turn 65.

If you’re still working and receive coverage from your employer, you can tell Medicare that you’re already covered under an employer-sponsored plan. This will save you from having to pay an enrollment penalty but also not require you to pay the Part B monthly benefit. In general, it’s best to stay on your employer-sponsored plan.

You don’t have to sign up for Part C—also known as a Medicare supplement but Original Medicare has some coverage gaps that could leave you with very large medical bills that you’re unable to pay. You should consider signing up for Part C coverage when Medicare becomes your primary insurer. If you’re still receiving health insurance from another source, Part C coverage probably isn’t necessary yet.

You are required to have some sort of prescription drug coverage, but it doesn’t have to be through a Part D plan. According to Medicare, if you go without one of the following for 63 days or more after your initial enrollment period you may be on the hook for a late enrollment penalty:

  • Part D prescription drug coverage
  • A Medicare Advantage plan (Part C)
  • Another Medicare plan that offers prescription drug coverage
  • Creditable prescription drug coverage from another source.


If you have prescription drug coverage through your current employer, you don’t need a plan from Medicare or another private insurer.

While a new survey shows that medical expenses rank as the most burdensome budget item for older Americans, they are more likely to compare costs for groceries (54 percent), homeowners/auto insurance (45 percent) or gas (44 percent) than their Medicare plan (33 percent).


“I think many people are wary of making big decisions about their health care coverage. It can be a scary thing to do,” said Bart Astor, author of “AARP Roadmap for the Rest of Your Life” which published the study.


Late Enrollment Penalties

Now that we know when and what you must have, what happens if you don’t comply and have to pay a late enrollment penalty? How much are the penalties?

Part A: You might see a 10 percent increase in your premium if you pay a premium for Part A. You will pay the higher premium for twice the number of years you weren’t enrolled. If you should have been enrolled 2 years ago, you have to pay the penalty fee for 4 years. Most people don’t pay for Part A and are automatically enrolled so there’s usually nothing to worry about here.

Part B: Be careful with Part B. The penalty is 10 percent for each 12-month period you should have been enrolled.

Example: If your initial enrollment period ended July 31, 2015 and you waited until August 2 of 2017 to enroll your premium will go up 20 percent. And you have to pay the penalty fee plus your normal premium for the rest of your life.

Part C: No penalty fee

Part D: This penalty requires some complicated math to figure out. You could pay approximately $11 per month as a penalty as long as you have Part D coverage.

Why the Fee?

It might seem kind of mean to charge a fee, but it makes sense. In order to keep costs as low as possible, Medicare relies on healthy people paying into the system to make up for the costs that are paid out for the unhealthy.

If Medicare allowed people to enroll later when their health starts to degrade, the costs to everybody would be significantly higher.



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