As both a Medicare expert and a lifelong football fan, I can tell you that there is as much confusion on the subject of Medicare penalties as there is confusion about the complexities of the penalties in a football game, which even the referees don’t understand some of the time. The worst part about Medicare penaties too is that unlike a holding penalty which costs your team 10 yards, and then you move on, Medicare penalties can go on month after month indefinitely and nobody wants that! So, let’s clear it up!
The Center for Medicare Services (Medicare) can impose two potential penalties:
1. Part B Penalty: If you do not sign up for Medicare Part B within your Initial Enrollment window— the period that begins three months before your birth month, includes your birth month and the three months following your birth month—then you are subject to a penalty of 10% for each year that you were eligible for Medicare but you don’t sign up for Part B.
So, for instance, with the regular payment amount being $148.50 per month the penalty for failing to sign up for Part B for one year would be 10% of that amount or $14.85. This would increase your monthly Part B payment amount to $163.55. Ouch! But, it gets worse year by year. The penalty would hike your monthly Part B costs to $178.40 if you waited two years. And then worse each year you delayed from there. Double Ouch!
There are, however, important exceptions. If you remain on Group Coverage then as long as your group coverage is in effect your requirement to sign up for Part B is deferred, with no penalties. Likewise, if you have coverage through the VA you will have no penalties. If, however, you have any form of individual coverage that isn’t through an employer group, you will likely be penalized.
2. Part D Penalty: Some people think, “I am not taking prescriptions right now, so why not wait until I am taking some drugs before I enroll in a Prescription Drug Plan?” After all, we wouldn’t go to a restaurant and order a meal until we were actually hungry. Medicare has an answer to the notion of waiting to sign up for a drug plan until you have a use for it: Big Penalties!
If you do not have drug coverage after your initial enrollment period, Medicare will impose a fine of 1% per month of the cost of an average Prescription Drug Plan for each month that you fail to have drug coverage. The penalty currently works out to be around 30 cents a month. Thirty cents may only be a bit of pocket changes but if you wait two years the penalty is 24 month times 30 cents. This then adds up to $7.20 added to your Medicare bill each month for life.
Once again though, just as with the Part B penalty, so long as you have Group Coverage or Veterans coverage, no worries, you will not have any penalties.