Medicare and Me: The Penalty Box

Leah Sugar Kari, AMR, FHIAS

Your enrollment in Medicare is an important event that requires your fact finding, attention, and timely action. Medicare pays approximately 80% of Medicare approved Part A and B charges, so it’s a benefit you’ll want to claim as soon as you are eligible.

Medicare has many moving parts and regulations. This article broadly addresses the penalties and price paid for not enrolling in Medicare Parts A and B on time.

Medicare Part A (hospital benefits) costs no monthly premium for most of us. Work 40 quarters, or 10 years, and you’ve paid for Part A through payroll deductions. Most people enroll in Part A in their Initial Enrollment Period (IEP) even with employer’s group coverage. Part A is in effect the first day of the month you turn 65 or qualify through disability, with no premium and no penalty.

What if you or your spouse don’t qualify for premium free Part A? You’ll pay a monthly premium up to $437. Postponing your enrollment triggers a 10% penalty that’s added to your Part A premium. The penalty doubles for each year you delay in enrolling in Part A, and you’ll have to wait to actually enroll in Part A if you’ve missed your IEP.

Medicare Part B (the medical benefit) costs $144.60 per month for most beneficiaries in 2020. The premium may increase based on your Modified Adjusted Gross Income (MAGI), based on your last year’s tax return, which actually is a two-year lookback. Enrollment in Part B may be delayed if your employer’s coverage is considered “creditable” (at least as good as what Medicare would provide) when you’re eligible. When you leave your employer’s coverage, you have eight months to enroll in Part B without a penalty. COBRA coverage doesn’t provide a special enrollment period for Part B, and can cause significant increases in your Part B premium when you do finally enroll.

Beware: if you miss your IEP, and don’t have creditable coverage provided by your employer’s plan, you must wait until January 1 to March 31 (the General Enrollment Period) of the next year to enroll in Medicare A or B. Your coverage won’t begin until July 1 of that year. The Part B penalty is a hefty 10% premium increase for each full 12 months that you don’t enroll. This penalty does not disappear, but is charged for as long as you are enrolled in Part B.

It’s never too early to prepare for entering Medicare. Visit www.Medicare.gov, www.socialsecurity.gov, or consult your licensed insurance agent to be clear on the rules and requirements to put your Medicare benefit in place. You’ve earned it!

Leah Sugar Kari, AMR, FHIAS, is a local licensed life and health insurance agent specializing in showing Medicare eligible people their insurance options. Reach Leah for comments at 520-484-3807 or [email protected].com. (TTY users dial 711.)