Penalty?! Nobody wants to pay a late enrollment penalty (LEP) for Medicare. It can actually continue to cost you for life! I know how crazy that sounds, but this is the exact reason why it is so important to work with a Medicare specialist months before you turn 65. You need to gather information, prepare, and do research so that you do not miss important timelines that could cost you money, permanently. We’re talking about spending hundreds or even thousands of dollars, and it could have been prevented. Let’s start from the beginning so you can mark your calendars to avoid paying a (lifetime!) late enrollment penalty (also known as “LEP”) for Medicare Part B and Medicare Part D.
What is the LEP for Medicare Part B?
If you did not enroll in Medicare Part B when you were first eligible (during your Initial Enrollment Period- IEP) your monthly premium may go up 10% for each 12-month period you could have had Medicare Part B, but did were not enrolled. The penalty is based on the standard Medicare Part B premium, regardless of the premium amount you actually pay
In most cases, you'll have to pay this penalty each time you pay your premiums, for as long as you have Medicare Part B. So similar to the LEP for Medicare Part D, this is permanent for as long as you are enrolled in Medicare. And, the penalty increases the longer you go without Medicare Part B coverage.
Can I Avoid the Medicare Part B Penalty?
YES! If you are turning 65, and enroll in Medicare Part B during your Initial Enrollment Period (IEP), you will not incur a late penalty. If you don’t enroll in Medicare Part B during your IEP, typically you will have to wait for the General Enrollment Period (GEP) before you will be allowed to sign up. General Enrollment runs from January 1st to March 31st each year.
If you enroll during the general enrollment your coverage will not start until July 1st. Important to note as this would mean you may be without insurance.
When Does the Part B Penalty Not Apply?
If you miss the enrollment deadline during your Initial Enrollment Period (IEP) and sign up during the next General Enrollment Period, and that time period is within fewer than 12 full months, you will not pay a penalty. So, for example, if your IEP ends on June 30, and you enroll in Medicare Part B during the General Enrollment Period (GEP), only 9 months will have passed before the end of the GEP on March 31.
For folks under age 65 who are enrolled in Medicare disability and paying a Medicare Part B late enrollment penalty, you will not pay the penalty after turning 65. Those with Medicaid will not need to worry about Medicare Part B premiums and penalties, as the state pays those.
If living outside of the United States, you do not get premium-free Medicare Part A, and you can’t enroll in Medicare Part A or Medicare Part B abroad. You will get a Special Enrollment Period (SEP) for three months after returning to the United States.
If I Don’t Sign Up for Medicare Part B because I have other Health Insurance, do I still get a Penalty?
If you have health insurance through your employer, your spouse’s employer, or a union, you can keep your coverage and won’t have to pay a penalty for waiting to sign up for Part B. However, if you lose your coverage or stop working for that employer, the clock begins to tick.
Usually, you will be allowed to sign up for Medicare Part B right away, during a Special Enrollment Period (SEP). This is an eight-month period beginning when the employment coverage ends. If you do not enroll during this period, you will have to pay a Medicare Part B penalty for each full 12 months you wait, beyond the date, the SEP began.
For example, if you’re still working when you turn 65, you can keep your employer health insurance instead of signing up for Medicare Part B. If you retire at age 67, you can avoid a penalty by signing up for Medicare Part B during your eight-month SEP. If you instead decide to wait until age 70 to enroll, you will pay a 30% penalty every month- 10% for every 12-month period you delayed enrollment.
While you have 8 months to enroll in Medicare Part B, you only have 63 days to enroll in Medicare Part D, or you will incur a late penalty. Tricky right?
Can I Appeal the Part B Penalty?
Yes! If you believe the Medicare Part B penalty should not apply to your current situation, you can ask for a review. Medicare has reconsideration request forms to file an appeal. Important note, you will still have to pay the penalty while waiting for your review to be processed.
Is there a Cap on the Part B Penalty?
Currently, there is no cap on the Medicare Part B late enrollment penalty.
What is the LEP for Medicare Part D?
The LEP is an amount that is permanently added to your Medicare Part D Prescription Drug coverage premium.How does it happen? You might owe a late enrollment penalty if you go without a Medicare Part D Prescription Drug plan or other creditable prescription drug coverage for any continuous period of 63 days or more after the end of your Initial Enrollment Period (or your Special Enrollment Period). For most people, this enrollment period is a few months before and after you turn 65.
Generally, your LEP is added to your monthly Medicare Part D Prescription Drug plan premium for as long as you have Medicare drug coverage, even if you change your Medicare plan. The late enrollment penalty amount changes each year. The cost of the late enrollment penalty depends on how long you went without a Medicare Part D Prescription Drug plan or other creditable prescription drug coverage.
How is the Late Enrollment Penalty calculated Medicare Part D?
Medicare, not the individual plan, calculates the late enrollment penalty when you first enroll in a Medicare Part D Prescription Drug plan. The late enrollment penalty amount is typically 1% of the national base beneficiary premium for each full, uncovered month that you did not have Medicare Part D Prescription Drug plan or other creditable coverage.
The national base beneficiary premium for 2022 will be $33.37. The monthly penalty is rounded to the nearest $0.10 and is added to the monthly Medicare Part D Prescription Drug plan premium. You could expect to pay an estimated $0.33 penalty for every month without drug coverage. The national base beneficiary premium may change each year, so your penalty amount may also change each year.
Typically, once Medicare determines your penalty amount, you will continue to owe a penalty for as long as you are enrolled in a Medicare Part D Prescription Drug plan. That means even if you join another Medicare plan, you will still have to pay the penalty after you’re enrolled. This also means that if you join a plan that has a $0 monthly premium, you will still owe a penalty.
Medicare Part D Late Enrollment Penalty Example Cost Calculation
A hypothetical example can make this a bit easier to understand (and help show you what you can save!) If you were without drug coverage for 10 months, in 2022 you would be charged 1% of the national base beneficiary premium, $33.37 for the 10 months. This would be 1% x $33.37 = around $3.33 per month that must be paid in addition to your Medicare Part D premium. The longer you are without creditable coverage, the higher the penalty you’ll have.
Medicare calculates your penalty amount each year and reports it to your Medicare Part D Prescription Drug plan or Medicare Advantage plan. Your Medicare Part D Prescription Drug plan will then send you a letter detailing the amount of your penalty.
Just in case you’re casually scrolling this article, let me be super clear: your Medicare Part D Late Enrollment Penalty is permanent.
Below are the national base average Medicare Part D Prescription Drug plan premium values used to calculate the late enrollment penalties for the past few years:
Are there any Exceptions to the Part D Late Enrollment Penalty?
Yes, there are some exceptions:
- If you receive Extra Help, your late enrollment penalty will be permanently erased .
- If you are under 65 and have Medicare, your late enrollment penalty will end when you turn 65.
- If you qualify for a state pharmaceutical assistance program (SPAP), it may pay your late enrollment penalty for you.
If you are eligible for Medicare Part D Extra Help (also known as the Low-Income Subsidy (LIS) program), you will not be subject to a late enrollment penalty. If you qualify for Medicare and Medicaid, you automatically qualify for the Medicare Part D Extra Help program.
How do you Know if you Owe a Part D Penalty?
After you join a Medicare Part D Prescription Drug plan, the plan will inform you if you owe a penalty and what your premium will be with the added penalty.
What if I Don’t Agree with the Part D Late Enrollment Penalty?
If you do not agree with your Late Enrollment Penalty, or feel it was added in error, you may be able to request a "reconsideration." Your Medicare Part D Prescription Drug plan will send information about how to request a reconsideration.
You will need to complete the Reconsideration Request form and return it to the address or fax number listed on the form. You must do this within 60 days from the date on the letter informing you of your late enrollment penalty. Include any proof that supports your case, such as a copy of your notice of creditable prescription drug coverage from an employer or union plan.
If you Do Not Agree with the Medicare Part D Late Enrollment Penalty, do you Need to Pay it?
Yes! According to Medicare law, the Late Enrollment Penalty is part of the premium, so if you have a Late Enrollment Penalty you must pay it with the premium. Additionally, you must continue to pay the penalty if you requested a reconsideration and it is under review. Medicare plans can disenroll members who don’t pay their premiums, including the Late Enrollment Penalty portion of the premium.
How Soon will you get a Reconsideration Decision?
Generally, Medicare’s contractor makes reconsideration decisions within 90 days. The contractor will try to reach a decision as quickly as possible. However, a person may request an extension, or Medicare’s contractor can, for good cause, take an additional 14 days to resolve a person’s case.
What if you Receive a Medicare Part D Late Enrollment Penalty but had Creditable Coverage?
When you join a Medicare Part D Prescription Drug plan, the plan will review Medicare’s systems to see if you had a potential break in creditable coverage for 63 days or more in a row. If so, the plan will send you a notice asking for information about prior prescription drug coverage. It’s critical that you complete this form and return it by the date on the form! This represents your chance to let the plan know about prior coverage that might not be in Medicare’s systems.
You can also send any proof of your prior coverage, like a copy of the notice of creditable prescription drug coverage from an employer or union health plWHat an. Some plans allow you to provide this information over the phone instead, but if that is the case, you still must do so by the date on the form.
What's the Best Way to Avoid Paying a Medicare LEP?
Talk to an independent Medicare agent! Not only can we help you manage all these details with things like timing of enrollment or forms and information, we’ll help walk you through the entire Medicare journey. Medicare is a complex system and everyone’s health needs are individual.
We’ve talked to person after person and found we could save them money every single month! As an independent agent, we have the benefit of searching the entire market and analyzing every insurance carrier available, not just one. This way, you’re presented with all the options at the right price, taking into consideration your individual health and medications. It makes a huge difference.
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What are you waiting for? Contact Medicare Dana today to discuss your health plans for age 65 and beyond.