Understanding when to enroll in Medicare is crucial to avoid penalties that can stick around for a lifetime! Lets discuss the different parts of Medicare and when to enroll to avoid those nasty penalties.
Medicare Part A covers hospitalization and skilled nursing. If you or a spouse worked at least 10 years (or 40 quarters) in the United States, then you are automatically eligible for Part A coverage. You don’t need to enroll into Part A as you are automatically enrolled upon turning 65. There is no monthly cost for Medicare Part A.
If you’re not eligible for premium-free Medicare Part A, you will need to sign up for it when you first become eligible to do so. If you don’t enroll when you’re first eligible for Medicare, you can be subject to a late-enrollment penalty, which is added to the Medicare Part A premium. The penalty is 10% of your monthly premium, and it applies regardless of the length of the delay. You have to pay this higher premium for twice the number of years you could have had Medicare Part A but didn’t sign up for it. For example, if you waited two years to enroll in Part A, you could pay the 10% penalty for four years.
Medicare Part B covers doctor services, preventative care, ambulance, outpatient care, surgery and durable medical equipment.
You are required to apply for Part B on your own, if you are not already receiving social security benefits. If you are receiving social security benefits then you will be automatically enrolled. You will enroll during your Initial Enrollment Period (IEP) which is a 7-month period that begins 3 months before the month you turn 65, includes the month you turn 65, and ends 3 months after the month you turn 65.
As we discussed, Part A is free to those that have worked in the United States for at least 10 years, however, Part B will cost you each month. If you make $85,000 or less per year, the standard monthly premium as of 2019 is $135.50. If you are in a higher income bracket then you may pay more.
The LEP (late enrollment penalty) will occur if you do not apply for Part B within your initial enrollment period. The LEP is a lifelong penalty that you’ll be responsible to pay!
Part B monthly premiums go up by ten percent each 12 month period that you do not have creditable coverage. For example, if you waited 3 years to sign up, your penalty could be 30% of the Part B premium. EX: $135.50 Standard Monthly Part B premium + 30 %= $176.15/MO
Instead of only having to pay $135.50 per month for Part B, now the cost is $40.65 more a month for as long as you’re enrolled in Medicare Part B . Applying for Part B sooner rather than later means you will have coverage and you will avoid the penalties for not signing up for Medicare!
Part D is your Prescription Drug Coverage. Even though you are not required to obtain this, we recommend you do even if you are not taking medications just so you are protected for the future and to avoid the penalties.
Your initial enrollment period for Part D is usually identical to your initial enrollment period for Part A and B. If you have a Medicare Advantage Plan, your Part D is probably included, so you won’t have to enroll in another one. If you have anything other than an advantage plan, Medicare expects you to enroll in a prescription plan on your own. Now, if you fail to enroll in Part D, you will get a late enrollment penalty just like with Part B.
The late-enrollment penalty for Medicare Prescription Drug Plans depends on how long you go without creditable coverage. The late-enrollment penalty is calculated by multiplying 1% of the “national base beneficiary premium” by the number of months you were eligible, but did not apply, for a Medicare Prescription Drug Plan. This amount is rounded to the nearest 10 cents and added to your monthly prescription drug plan premium. The national base beneficiary premium may change each year, so the late-enrollment penalty may also change each year. Beneficiaries may have to pay the late-enrollment penalty the whole time they’re enrolled in a Medicare Prescription Drug Plan!
For example: Mark doesn’t enroll in Part D because he doesn’t take many medications. He goes 48 months without Part D coverage.
48 months x 1% of $35.02 (.35 ₵) = $16.80
$16.80 + your Part D monthly premium = your Part D monthly premium for life!
Some beneficiaries qualify for Special Enrollment Periods (SEPs), in certain situations. If you qualify for an SEP, you can enroll in Medicare Part A or Part B during your SEP without having to pay a late-enrollment penalty. For example, if you’re covered by a group health plan because you or your spouse (or a family member if you’re disabled) is working, your SEP for Medicare Part A or Part B is either of the following:
Anytime you’re still covered by the group plan.
During the eight months starting the month after employment ends or the group plan coverage ends, whichever happens first. For example, if your employment ends on March 15 and your group coverage continues until March 30, you have until November 15 to enroll in Medicare Part A and Part B.
If you qualify for an SEP, usually the late-enrollment penalty won’t apply to you!
That’s where Blue Compass Solutions comes in. As our client, we’d help you through all of this! With our guidance we can make sure you will never be hit with any penalties for not signing for coverage at the appropriate time. Please contact us directly at (844) 817-0878 for free assistance.