It’s important to know when you need to sign up to Medicare. Many Americans do not know that they can be subject to Medicare Late Enrollment Penalties if they miss their Initial Enrollment Period.
The most common penalties are for Medicare Part B and D (Prescription Drug Coverage).
- The penalties are to ensure that eligible Medicare beneficiaries do not delay enrollment.
- The reason for this is to make sure that there is not a ‘free-rider’ problem where eligible Medicare beneficiaries only sign up for Medicare when they are sick or require Medicare-covered services, in order to skip paying any premiums while they were healthy.
The penalties can be significant:
- For example, if you don’t get Part B when you are first eligible, your monthly premium may go up 10% for each 12-month period you could’ve had Part B, but didn’t sign up. In most cases, you’ll have to pay this penalty for as long as you have Part B. The penalty increases the longer you go without Part B coverage.
- Similarly for Part D drug coverage, if you do not enroll in a drug plan when you first become eligible for Medicare, and you are not still working, you can incur lifelong penalties.
