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Medicare penalties you should know about

By Colton Mortensen

I have assisted many people with their Medicare decisions over the past six years. I’ve also helped many people during that time who were dealing with penalties with different parts of Medicare and almost every single one of them were not aware that they were doing anything that would result in being charged a penalty. The lack of information is the culprit to so many people.

A quick note on penalties…

The first thing to understand about Medicare penalties is that they come as a result of not having certain parts for a time and then signing up on them later. If you didn’t have a legitimate reason for not having coverage, you will be charged a penalty when you do finally sign up. This will make more sense as we go through each part in detail.

Part A Penalty

The Part A penalty is the one I’ve seen the least over the years. Most people qualify for Medicare Part A premium-free so they don’t need to worry about a penalty. If you qualify for premium-free Part A, you can sign up at any time without worrying about a penalty.

A question that often comes up that should be addressed has to do with signing up for Medicare if the person in question will be working past 65 and has group health plan coverage through their employer. If they employer has 20 or more employees, the group health plan coverage will be primary and you don’t actually need to sign up for Medicare Parts A or B if you don’t want to while enrolled in the employer coverage. If they employer has less than 20 employees, Medicare will actually be primary and in that case you should sign up for Medicare Parts A and B in order to avoid any penalties.

If someone does not qualify for premium-free Part A, they should sign up for/buy Part A as soon as they are eligible. If they fail to do so, their premium may go up 10% and they would have to pay this higher premium for twice as many years as they didn’t have Part A.

Part B Penalty

Generally speaking if you fail to enroll in Part B when you’re first eligible, you will need to pay a 10% penalty along with your Part B premium after you do sign up and you will need to continue to pay it for as long as you do have Part B.

If you meet certain conditions you won’t need to worry about the Part B penalty. The most common one being having qualified group health plan coverage like we talked about in the Part A section. If you’re still working past 65 and you have group health plan coverage, it is likely you will want to delay your Part B enrollment. This is because Part B does have a premium that all have to pay unless you qualify for extra assistance.

Part D Penalty

The last penalty we will go over here is also the most common one I’ve seen people deal with in my experience. The Part D penalty works very similarly to the Part B penalty in terms of the rules but differs in how the penalty is actually calculated.

If you do not sign up for Part D coverage when you’re first eligible and don’t have qualifying prescription drug coverage, you will start accruing a penalty that will come into effect once you do enroll. The penalty is calculated at 1% of the national average prescription drug plan premium multiplied by the number of months that you did not have coverage.

For example, if you went 5 years without coverage before enrolling, you would be charged 60% (for the 60 months without coverage) of the average Part D premium. You would be charged this penalty for as long as you have Part D coverage unless you qualify for certain assistance programs through the state or Social Security.

Again, qualified group health plan coverage through your employer if you’re still working would meet the requirement and you won’t need to worry about paying the Part D penalty later if this is the case. There is also one more common condition that voids the penalty and that is for those that qualify for VA benefits. VA benefits qualify for Part D coverage so if you have that and want to sign up for a Part D prescription drug plan at some point, you won’t need to pay the penalty. It is important to note here that even though VA qualifies for Part D, it does not qualify for Part B. If you have VA benefits and don’t chose to enroll into Part B when eligible and don’t meet any other conditions, you will still pay the Part B penalty once and if you do enroll in the future.

In conclusion

There are many parts to Medicare, especially when it comes to penalties. While the conditions mentioned above are arguably the most common of all of them, you should make sure you do your research for your individual circumstances.

If you would like to speak to someone knowledgable, I ask that you give us a call! We love helping others through this Medicare maze and it would be a pleasure to help you as well! You can call us at (928)532-6698 or through our contact page on this site!

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Interested in:

If you select "help with Medicare plans", a sales agent may mail, call, or e-mail as a result of completing the information to discuss Medicare Advantage, Prescription Drug Plans, or Medicare Supplement Insurance.