Delaying Medicare Enrollment Can Prove Costly

Posted on: April 16th, 2012 by Lawrence A. Friedman

Originally, Medicare had two parts: Part A covered hospitalizations and related services while Part B covered phsysician and other services. Later on, Part C Medicare Advantage was added to permit private all in one plans as an alternative to Parts A and B. Finally, a few years ago, Congress added Part D to Medicare to cover some prescription costs, although some Medicare Advantage plans are bundled with prescription coverage.

Medicare Part A is provided without a premium beyond the Medicare payroll tax but persons who enroll in Medicare Parts B, C, and D, must pay additional premiums. For this reason, some folks are tempted to save some premium dollars and wait until they are older and sicker to sign up for Medicare Parts B and D or a Part C Medicare Advantage plan. However, this strategy can backfire severely.

In the first place if you get sick, you could be hit with major medical and drug bills, and nobody can be certain that an unexpected illness or accident won’t strike.

To prevent people from unduly shifting health care costs to Medicare, Medicare charges an additional premium or penalty when an individual enrolls in Part B, C, or D after first becoming eligible unless an exception applies. The Part B penalty is 10% for each year Part B enrollment is delayed. The Part D penalty is based on the base Part D premium in effect each year increases for each month a Medicare participant goes without drug coverage. For instance, a Medicare participant who delays enrolling in Part D for three and a half years might have a roughly $14.00 penalty added to each month’s Part D premium when she finally does enroll. Part C penalties depend on the particular Medicare Advantage plan.

Exceptions to the penalties apply when an individual has alternate coverage recognized by Medicare. This can arise as a result of certain employer or union medical and prescription plans. However, not all plans will avoid Medicare penalties and the rules may vary depending on whether the Medicare participant or spouse is employed.

In addition to premium penalties, persons who are eligible for Medicare but don’t enroll may find employer coverage limited as a result. For instance, an employer plan may refuse to cover costs that Medicare would fund if the employee or employee’s spouse had elected full Medicare coverage.

In short, Medicare rules are quite complicated and errors and misunderstandings can prove costly. Therefore, before deciding to forego any Medicare Part, it is important to understand the penalties that may arise. FriedmanLaw helps clients navigate the maze of government benefit programs and make sense of their options.

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Homepage photo: Cows grazing at Meadowbrook Farm, Bernardsville, NJ by Siddharth Mallya. October 23, 2012.
Interior photo: Somerset hills pastoral scene by Lawrence Friedman.