What is a Medicare Late Enrollment Penalty?
A Medicare Late Enrollment Penalty (LEP) is an additional monthly amount you will be required to pay to Medicare if you did not enroll in Medicare Part B and/or D when you first became eligible. Additionally, for those that have to pay for Medicare Part A, there is also a late enrollment penalty for not signing up when first eligible, which is typically when you turn 65. The penalties for Parts B and D will last for your lifetime. For Part A, the maximum number of years the penalty can last is four.
How will I know if I owe a Late Enrollment Penalty?
You can speculate on the amount of your penalty; however, you will be notified of the actual amount when you formally apply for Medicare Parts A, B or D. Once the government is aware of your enrollment into these parts of Medicare, they will calculate your penalty and send you, in writing, the actual amount you owe for the upcoming year. Since Medicare costs change each year (which is how the penalties are calculated), you will be notified each year of the new penalty amount.
Medicare Part A Late Enrollment Penalties
The late enrollment penalty for Medicare Part A (for those who are not automatically enrolled), is 10% of your monthly premium if you miss your Medicare enrollment deadline. This is applied no matter how long the delay is, and the penalty is added to your premium cost for twice the number of years you waited to enroll. For example, if you waited one year past your initial eligibility to enroll, then you have to pay the penalty for two years.
Medicare Part B Late Enrollment Penalties
The late enrollment penalty for Medicare Part B will result in a 10% increase in your monthly premiums for each 12-month period you went without coverage starting from your initial eligibility. Unlike for Part A, the late enrollment penalty for Part B is lifelong (or for as long as you have Part B coverage).
To help understand this calculation, let’s say you were eligible for Part B at age 65, but did not enroll, until age 70. You would have a 5-year period without Part B coverage, which would be a 50% penalty (10% times 5 years), multiplied by the base Part B premium of the calendar year you are enrolled. So for 2021, the base cost would be $148.50, multiplied by 50%, and would equal $74.25, which would be added to your Part B monthly premium costs. Please note this penalty is in addition to any applicable Part B Income-Related Monthly Adjustment Amount (IRMAA) payments.
Medicare Part D Late Enrollment Penalties
The late enrollment penalty for Medicare Part D is 1% of the average national base monthly premium, rounded to the nearest 10 cents for each month you did not enroll. This penalty is added to your premium each month you are enrolled, and generally lasts for as long as you have Medicare drug coverage.
For example, let’s say you went five years without Part D coverage after your initial eligibility. This would equate to a 60% penalty (1% times 60 months), multiplied by the national premium average ($33.06 in 2021), which would equal an added penalty of $19.80. This penalty would be paid in addition to your Part D premiums, as well as any applicable Part D IRMAA payments.
It’s important to use this information wisely now that you know about the lifelong penalties that you can incur due to late enrollment. Be prepared to enroll in Medicare during your Initial Enrollment Period, or check in advance with a licensed Medicare insurance agent to see if you qualify for the Special Enrollment Period. For one-on-one personalized assistance with discussing plan options, navigating Medicare enrollment or learning more about avoiding enrollment penalties, contact Medicare Portal today!