It’s no secret that Medicare is a vital program for millions of Americans. But what happens if you don’t sign up for Medicare when you’re first eligible? You could be subject to a late enrollment penalty. In this blog post, we will discuss the late enrollment penalty for 2022 and how it could impact your finances. Keep reading to learn more!
What Periods to Know!
It’s important to understand the period when you’re first eligible for Medicare. This period is called your Medicare Initial Enrollment Period. If you qualify for Medicare by age, it starts three months before you turn 65. This includes the month you turn 65, and ends three months later. It lasts for a total of seven months.
Original Medicare refers to Medicare Part A (hospital insurance) and Part B (medical insurance). It is a government-sponsored health care program for those who qualify by age (usually 65 and over). You may also qualify for Medicare before age 65 if you receive Social Security disability benefits. Medicare Part D is optional prescription drug coverage, available from private Medicare-approved insurance companies.
Note that another eligibility requirement for Medicare is U.S. citizenship or permanent legal residence. This has to be for at least five years in a row.
Medicare Late Enrollment Penalty for Part A
Most Medicare beneficiaries get Medicare Part A premium-free. You won’t be charged a premium for Part A if you or your spouse worked at least 10 years. Or worked at least (40 quarters) while paying Medicare taxes. If you’re automatically enrolled in Medicare Part A because you are collecting Social Security. Or maybe you are on Railroad Retirement benefits. When you turn 65 or qualify through disability.
If you do not qualify for premium-free Medicare Part A, and you’re not automatically enrolled. Then you may be required to pay a 10% higher monthly premium. This would be if you do not enroll when you are first eligible. You will have to pay this higher premium for twice the number of years that you could have had coverage. The Part A premium can be as high as $499 in 2022 (without the penalty).
For example, if you delayed enrollment in Medicare Part A for one year. You would have lost your IEP. This would make it 10% higher monthly premium for two years.
Medicare Part B Late Enrollment Penalty
If you do not enroll in Medicare Part B when you are first eligible. And you do not have other qualifying health insurance, then you may be subject to a late enrollment penalty. The Part B late enrollment penalty is an additional monthly premium that is added to your base Part B premium. The amount of the late enrollment penalty depends on how long you delayed enrolling in Part B.
The Part B late enrollment penalty is calculated by multiplying your “late enrollment factor” (LEF). They multiply it by the “national base beneficiary premium” ($170.10 in 2022). The LEF is determined by the number of full, consecutive 12-month periods that you were eligible. The LEF is added to your Part B premium. This will add to your total monthly premium plus penalty.
For example, if you delayed enrolling in Medicare Part B for two years. This would make your LEF then would be 24% (two 12-month periods x 12% = 24%). If your base Part B premium is $170.50 in 2022. Then your monthly premium with the late enrollment penalty would be $210.62 ($170.50 + (24% x $170.50)).
You may have to pay the Part B late enrollment penalty for as long as you have Medicare Part B coverage.
Note that there are some circumstances where you can avoid or get a waiver for the Part B late enrollment penalty.
Medicare Part D Late Enrollment Penalty
If you do not enroll in Medicare Part D when you are first eligible, and you do not have other qualifying health insurance, then you may be subject to a late enrollment penalty. The amount of the late enrollment penalty depends on how long you delayed enrolling in Part D.
The Part D late enrollment penalty is calculated by multiplying your “late enrollment factor” (LEF) by the “national base beneficiary premium” ($33.06 in 2022). The LEF is determined by the number of full, consecutive 12-month periods that you were eligible for Medicare Part D, but did not enroll. The LEF is added to your Part D premium, and the total is your monthly premium with the late enrollment penalty.
For example, if you delayed enrolling in Medicare Part D for two years, your L EF would be 24% (two 12-month periods x 12% = 24%). If your base Part D premium is $33.06 in 2022, your monthly premium with the late enrollment penalty would be $40.68 ($33.06 + (24% x $33.06)).
You may have to pay the Part D late enrollment penalty for as long as you have Medicare Part D coverage.
Note that there are some circumstances where you can avoid or get a waiver for the Part D late enrollment penalty.
In Closing, if you need help with figuring out how to avoid late penalties or how to prepare yourself for getting enrolled on time. Please give us a call whenever you are ready.
