Dear Rusty: I’ve never been a fan of socialized medicine, so wasn’t happy with that whole “Great Society” thing that happened back in the 1960’s, which is where Medicare started. Just on principle, I refused to sign up for Medicare when I turned 65, but with age comes wisdom, I guess, so now I find that maybe I should have. I’m 68 now and starting to develop some health issues, but my insurance agent says that because I didn’t sign up for Medicare when I was 65 there’s going to be penalties. We didn’t talk about how much, but I’m hoping you can give me some insight on what I’m up against. Signed: Wiser Now than Before
Dear Wiser: While I always admire one who sticks to their principles, I also believe, to coin a phrase, that wisdom is the better part of valor. You’ve been lucky health-wise and avoided a major health crisis for the past several years, but with the wisdom gained by age now realize that the Medicare you paid into over your lifetime isn’t such a bad thing after all. The problem is, the law requires that you enroll in Medicare at age 65 unless you have other “creditable” coverage (e.g., from an employer or the VA). To have not done so does, indeed, mean that by enrolling now you’ll have to pay a “late enrollment penalty”, at least for Medicare Part B (doctors and outpatient services) and Part D (Prescription Drug coverage). Assuming you’re eligible for or collecting Social Security, your Part A (hospitalization) coverage should be free, even if you didn’t enroll during your “initial enrollment period”, or “IEP”, which started 3 months before the month you turned 65 and lasted until 3 months after.
The Part B penalty for late enrollment is applied as a supplement to the base Medicare Part B premium amount which, for 2018, is $134 per month if you earned less than $85,000 as a single-filer in 2016 (The premium is higher if you earned more than that). The late enrollment penalty for Part B is 10% additional for each full year after the end of your initial enrollment period, so $134/month plus 30% means you’ll be paying $174/month instead, and the penalty is recurring every year. In fact, if the Part B premium goes up (as it periodically does), so will your penalty because the base number is higher.
As for Medicare Part D, although it’s hard to justify paying for prescription drug coverage you may not currently need, the sticker shock for enrolling if you need to later is quite severe. Compared to the Part B penalty, the computation for late enrollment in Part D is complicated. You owe the penalty, again on top of your regular Part D premium amount, if you go more than 63 days past your IEP without a creditable Medicare Part D drug plan, a Medicare Advantage (Part C) plan which includes drug coverage, or another healthcare plan (such as the VA) which includes creditable prescription drug coverage. Part D premiums are set by the insurance carrier which provides the coverage, but the penalty amount is set by Medicare, as follows: 1% of the “National Base Beneficiary Premium” ($32.02 for 2018), times the number of full months you didn’t have creditable Part D coverage (rounded to the nearest 10 cents). That amount is added to the Part D premium amount as determined by your insurance provider. And like Part B, the penalty for late enrollment in Part D coverage is recurring and may increase with changes to the National Base Beneficiary Premium as computed by Medicare.
It’s important to note that since you’re well past your IEP, your timing to enroll in Medicare is now limited. You can only enroll in Part A & B during the annual “General Enrollment Period” which runs from January 1st to March 31st for coverage to begin on July 1st. And you can only enroll in a Part D drug plan during the annual Open Enrollment Period which runs from October 15th to December 7th.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at firstname.lastname@example.org.