Delaying Medicare Enrollment Can Lead To Life-Long Penalties

Miss a credit card payment and you pay a late fee and interest. Return a library book after the due date and there’s a fine. Miss your chance to enroll in Medicare and you face late enrollment penalties. However, unlike with the credit card or library book, Medicare penalties can be costly and last a lifetime.

The three key parts of Medicare — Part A, hospital insurance; Part B; medical insurance; and Part D, prescription drug coverage — all carry late enrollment penalties that apply to anyone who has Medicare. These were designed to serve as incentives to get people to enroll when they should. However, it is not always clear when that time has arrived.

Medicare Part B Late Enrollment Penalty

This penalty is probably the most onerous. It kicks in when a Medicare-eligible individual goes 12 months (one full year) without Part B. The penalty amount is 10% of the standard Part B premium, $185 in 2025, for every full year late in enrolling. Because the penalty is tagged to the Part B premium, the amount changes every year and follows a person for life.

The General Enrollment Period, January 1-March 31, offers the chance to get back into Part B.

Read more about the Part B penalty here.

Medicare Part D Late Enrollment Penalty

This is another lifelong penalty. The penalty applies when an eligible individual goes 63 days without creditable drug coverage. The amount is 1% of the base beneficiary premium for every month without coverage, $0.3678 in 2025. For example, 20 months late in enrolling adds $7.35 (rounded to nearest dime) to the plan’s monthly premium. This penalty also changes every year and follows one for life.

Those who do not enroll in Part D, either through a standalone drug or Medicare Advantage plan, at age 65 need to verify that the non-Medicare drug coverage they have, such as that included in a retiree plan, is considered creditable. That means the plan is expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. If so, then it’s creditable and Part D enrollment can be delayed for the duration of that coverage. If it’s not creditable, a penalty is around the corner, unless the individual signs up for Part D.

Medicare has some formulas to determine whether the coverage is creditable. However, this determination is not something the average person can make. That’s why companies with group plans including drug coverage must notify those over 65 every October about the status of the plan. (Find a sample notice here.) Anyone retiring after age 65 should also ask for a copy of the current notice. (Remember, the penalty kicks in after only two months.) Save those notices.

Note these important points.

• Those with employer group health plans need to be careful. Some Inflation Reduction Act initiatives can make it more difficult for plans to demonstrate creditable coverage — that is, that they pay at least as much as a Part D drug plan. These include no cost sharing for vaccines, a $35 insulin cap and the $2,000 cap on out-of-pocket costs for covered medications.
• The Open Enrollment Period, October 15-December 7, presents an opportunity to get out of a penalty situation by enrolling in Part D coverage through a standalone or Medicare Advantage plan.

Medicare Part A Penalty

Part A can be a premium-free benefit, so why is this on the list for late enrollment penalties? The Part A penalty applies to those who do not qualify for premium-free Part A. They (or a spouse) have not worked and paid taxes for 10 years (40 quarters) and do not have coverage through an employer group health plan based on current employment. If they don’t enroll in Medicare during their Initial Enrollment Period, they will pay a monthly penalty, 10% of the standard Part A premium. In 2025, the monthly premium is $285 for those with at least 30 quarters and $518 for fewer than 30 quarters.

Here are three additional points.

1. It is not a lifelong penalty; it applies for twice the number of years without Part A. A beneficiary who goes three years without Part A will pay the penalty for six.
2. When enrolling in Part A in this situation, Part B enrollment is required.
3. Just as with Part B, those who missed the initial opportunity can enroll during the General Enrollment Period.

3 Tips To Avoid Medicare Late Enrollment Penalties

• Enroll in Part B at any time you will continue with non-employer group coverage after age 65. This could be when you’re first eligible at age 65 or if retiring from active employment after that.
• Ask the plan sponsor for the notice of creditable prescription drug coverage when turning 65 and make sure to get and save the annual notices every October.
• If you have not earned 40 credits and don’t have a group health plan based on active employment, enroll in Part A and Part B at age 65.

This all may seem too simple in this summarized form. But it really is simple — if you pay attention. Just a few timely moves on your part as you approach your retirement, and you’re home free. The cost of living is increasing steadily every day. Why take on costly penalties that you can easily avoid?