Medicare wants you to enroll as early as you can and remain enrolled while you’re at your youngest and healthiest eligible age. To incentivize you to do so, there are a variety of penalties imposed for later enrollment and interrupted enrollment. Here are some of the common ones:
Late Enrollment in Part B
If you don’t sign up for Medicare Part B when you are first eligible, then you will have to pay a late enrollment penalty in the form of higher monthly premiums for as long as you are enrolled in Medicare. That penalty is equivalent to 10 percent of your Part B premium for every year that you delayed your enrollment after you were eligible. So, for example the basic 2015 premium for a single retiree earning less than $85,000 is $104.90. But if that same person postpones enrollment by two years, the premiums increase by $20.98 to $125.88.
There are some exceptions – known as Special Enrollment Periods – that may exempt you from the Part B late enrollment penalties. Special Enrollment Periods are covered in another article.
Withdraw then Re-enroll in Part B
The same penalty logic applies for someone who terminates Part B coverage and then re-enrolls in it later. For every year that you opt out, you’ll be imposed a 10 percent premium penalty upon re-enrolling.
Medicare Part D (Prescription Drug) Plan Penalties
Medicare Part D prescription drug coverage plans could also impose an enrollment penalty if you do not sign up for a plan within your initial enrollment period. With Medicare Part D, you will owe a late penalty if you fall into one of the following categories:
* Creditable coverage is health insurance coverage that you had before you enrolled in your new health insurance plan – perhaps through an employer or a spouse’s employer. For your coverage to remain “creditable” it cannot be be interrupted by a period of 63 or more days.