By Mary Johnson
Do you turn 65 this year? Are you or your spouse still working and receiving health insurance benefits from a current employer? Are you age 65 or older now, but haven’t signed up for Medicare Parts A, B and/or Part D yet? If you said yes to any one of these questions, keep reading! As Social Security’s full retirement age rises, a growing number of older adults are getting hit with costly Medicare late enrollment penalties for their coverage. Unlike the full benefits retirement age, which is now 66, Medicare’s eligibility age is still 65.
Tricky enrollment period rules, multiple enrollment dates for Medicare’s alphabet of Parts A through D, and a high hassle factor are tripping up even the most financially - savvy of seniors. The penalties, which can add thousands in extra cost to your premiums, can be avoided or minimized. But you need to learn Medicare’s enrollment rules, and when to take timely action. Unlike a tax penalty that you pay just once — Medicare late enrollment penalties are life long. You pay a penalty on the affected Medicare premium every year as long as you remain enrolled in Medicare. If you have good genes, that could mean 25 or even 30 years.
The amount that you pay adds up fast because it increases two ways. Like a malignant tumor, it grows bigger the longer you put off signing up. And, because it’s based on a percentage of the Medicare premium, the amount you pay climbs along with the premium. The penalty for Part B grows 10% for each year you delay signing up, and the penalty for Part D is 1% of the national base Part D premium, for every month you’re not covered. Here are examples of how they work from the 2012 Medicare & You handbook:
• Part B penalty: Mr. Smith’s initial enrollment period ended September 30, 2008. He waited to sign up for Part B until the General Enrollment Period in March 2011. His Part B premium penalty is 20%. (While Mr. Smith waited a total of 30 months to sign up, this included only two full 12-month periods.) Editor’s note: A 30-month delay would cost Mr. Smith an estimated $2,905 in extra premiums over the next ten years.
• Part D penalty: Mrs. Jones didn’t join when she was first eligible— by May 15, 2007. She joined a Medicare drug plan with an effective date of January 1, 2011. Since Mrs. Jones didn’t join when she was first eligible and went without other creditable drug coverage for 43 months (June 2007 - December 2010), she will be charged a monthly penalty of $13.90 in 2011 ($32.34 X .01 + $.3234 X 43 = $13.90) in addition to her plan’s premium.
Editor’s note: A 43-month delay signing up for Medicare Part D would cost Mrs. Jones an estimated $2,055 over the next ten years. Presidential candidates, as well as Members of Congress, are debating the question of whether beneficiaries should pay a bigger share of their Medicare costs than they already do. With late enrollment penalties tied to the size of premiums — higher premiums in the future would mean higher penalties for those affected.
Would people affected by late enrollment penalties be able to afford their premiums if they had to pay even bigger shares than they do now? Are you affected? Send an email to us and let us know what you think.
To learn more about enrollment periods and when to enroll, view the Best Ways to Save article, “When Should I Enroll In Medicare?”
If you missed the Part B enrollment period, click here to view the Medicare late enrollment calculator can give you an estimate of the percentage of the premium that will be assessed.
To enroll in Medicare, contact the Social Security Administration at 1-800-772-1213 for more information.
Sources: 2011 Medicare Trustees Report, May 13, 2011. 2012 Medicare & You, CMS Product No. 10050, August, 2011.