While there are many benefits to having Traditional Medicare, the few disadvantages come in the form of late penalties.
Traditional Medicare consists of two parts, Medicare Part A and Medicare Part B. Part A benefits are your hospital benefits and covers any treatment given during hospitalization.
Part B consists of coverage for doctor’s office visits, diagnostic testing, lab work, outpatient surgeries, and ER visits.
Prescription drug coverage is not available on Medicare Part A or Medicare Part B. There is Medicare Part D, which is stand-alone insurance that provides prescription medication coverage.
And while Medicare covers most everything, there’s still out of pocket costs like deductibles, copayments, coinsurance, and other medical expenses.
How to Avoid Medicare Part A Late Penalty Fees
Most seniors are automatically enrolled for Traditional Medicare Part A by the time they turn 65 years of age. If you or your spouse worked for ten or more years, you’ve paid into Medicare and are then enrolled without charge.
If you haven’t previously worked or haven’t fulfilled the required amount of time to become eligible, you may still enroll; however, there may be a premium to pay.
For those not automatically enrolled in Medicare Part A, there’s a timeframe called the Initial Enrollment Period (IEP). The IEP starts the three months leading up to your 65th birthday and then lasts through the three months following your birthday month.
Failing to enroll during this period will result in the Medicare Part A penalty. The Medicare Part A penalty adds an extra 10% to the Part A premiums.
Each year gone without Part A benefits is multiplied by two and then added onto the premium costs. Depending on how long gone without enrollment, will determine the penalty fees as well as how long they will be charged.
How to Avoid Medicare Part B Late Penalty Fees
With Medicare Part B, enrollment is standard, and the Initial Enrollment Period is the same as enrollment for Medicare Part A.
As of 2018, The Centers for Medicare and Medicaid Services (CMS) set the Part B premium as $134.00. This can increase, however, based on income and decrease if ones on Social Security or disabled.
While the IEP’s are the same with both Medicare Part A and Medicare Part B, the penalty is different. The Medicare Part B penalty increases your monthly premium by 10% for every year gone without Part B benefits.
Unlike Medicare Part A’s penalty, with the Medicare Part B penalty, the extra premium charge is paid for the duration of time the Part B benefits are carried.
How to Avoid Medicare Part D Late Penalty Fees
With Medicare Part D, the various private health insurance carriers in your area offer the Prescription Drug Plans (PDP).
As of 2018, the Medicare Part D premium averages around $34.00; however, plan pricing can differ because of location and plan.
Just like with Traditional Medicare, the IEP is effective for the seven months surrounding your 65th birthday. Medicare Part D for prescription drug coverage is optional; however, there is a Part D penalty for not enrolling in the Initial Enrollment Period.
After 63 consecutive days or more having gone without Medicare Part D results in the penalty.
You will be penalized unless you have any of the following:
- A Medicare PDP
- A Medicare Advantage Plan or Medicare Part C Plan offering prescription benefits
- Creditable coverage through employmentor the union with benefits offers at least, if not more, of Medicare’s standard prescription drug coverage.
- Any other Prescription Drug Plan offered by a different Medicare Plan
The Part D penalty is calculated by adding 1% for each month without prescription drug coverage. Once this is determined, the penalty is then rounded to the nearest $.10 and then added onto the monthly premium.
The Part D penalty is permanent and must be paid while prescription drug coverage is active.
Another downside, the penalty may increase every time there’s an increase in the national base beneficiary premium.
Medicare Late Enrollment Exceptions
For Medicare Part A and Medicare Part B, penalty exceptions are possible if you or a spouse carry qualifying health insurance from another source.
Although there are Special Enrollment Periods (SEP) available when an individual loses health insurance from a union or group health plan, they have 8 months to enroll for Traditional Medicare benefits.
If the Medicare beneficiary enrolls during the SEP, no penalties will be enforced.
There is also a late enrollment exception with Medicare Part D. Medicare Part D offers the Extra Help program which subsidizes prescription drug costs for individuals with low income.
This Extra Help Program helps on expenses associated with deductibles, premiums, copays, and coinsurance.
With the Extra Help program, there are no late penalty fees. Another benefit with the Extra Help program is there is no Part D coverage gap which is also known as the. “donut hole”.
Additional Medicare Help
With all the penalties tied to late enrollment, it’s easy to see how quickly the out of pocket expenses can add up.
Most seniors are on a fixed income, you’ll want to enroll in Medicare as soon as possible to avoid any late penalty fees associated with the three parts offered by Medicare.
There are several options in which additional assistance can be provided for seniors carrying Medicare benefits. Opting for a Medicare Advantage Plan or subsidizing with a Medicare Supplement Plan will save you money and provide benefits.