Medicare late enrollment surcharge: What happens If you don’t apply at age 65?

Medicare provides essential healthcare coverage for seniors in the U.S., but enrolling on time is crucial to avoid costly penalties.

If you do not apply for Medicare when you first become eligible at age 65, you may have to pay a lifetime surcharge on your premiums.

These penalties primarily apply to Medicare Part B (Medical Insurance) and Part D (Prescription Drug Coverage).

Understanding these surcharges can help you make informed decisions and minimize unnecessary expenses.

1. Who needs to enroll in Medicare at age 65?

Most people become eligible for Medicare at age 65. You must enroll during your Initial Enrollment Period (IEP), which begins three months before your 65th birthday and lasts until three months after.

You must sign up for Medicare on time unless:

• You have qualifying employer-based health insurance through an active job (yours or your spouse’s).
• You qualify for automatic enrollment through Social Security benefits.

If you do not have a valid reason for delaying enrollment, you may face permanent premium penalties when you sign up later.

2. Medicare Part B late enrollment penalty

Medicare Part B covers doctor visits, outpatient care, preventive services, and medical supplies. If you do not enroll on time and do not have qualifying employer coverage, you will be subject to a late enrollment penalty.

How the penalty works:

• You will pay an extra 10% on your monthly Part B premium for every 12-month period you delayed enrollment.
• This penalty is permanent and applies for as long as you have Medicare.

Example:

• If you delay enrollment for two years, your penalty will be 20% (10% per year) on top of your standard Part B premium.
• If the monthly Part B premium is $174.70, a 20% penalty means you will pay an extra $34.94 per month for life, totaling $209.64 per month.

How to avoid it:

• Enroll in Medicare Part B as soon as you become eligible, unless you have employer-based coverage.
• If you are still working past 65 and covered by an employer plan, sign up for Medicare within eight months of leaving the job to avoid penalties.

3. Medicare Part D late enrollment penalty

Medicare Part D provides coverage for prescription drugs. If you do not enroll on time and do not have creditable drug coverage, you will be subject to a lifetime late enrollment penalty.

How the penalty works:

• The Part D penalty is 1% of the national base beneficiary premium for every month you were without coverage.
• The longer you go without drug coverage, the higher your penalty.
• The penalty is permanent and is added to your monthly Part D premium.

Example:

• If you go 18 months without enrolling in Part D, your penalty will be 18% of the national base premium.
• If the base premium is $34.70, your penalty would be $6.25 extra per month for life.

How to avoid it:

• Enroll in Part D when you first become eligible, even if you don’t currently take prescription medications.
• If you have employer or retiree drug coverage, ensure it meets Medicare’s “creditable coverage” standard to avoid penalties.

4. Exceptions and special Enrollment periods

If you miss the Initial Enrollment Period, you may qualify for a Special Enrollment Period to sign up without penalties if:

• You or your spouse were covered by a large employer’s group health plan (20+ employees).
• You were serving in active military duty and covered by TRICARE or another government plan.

Once your employer-based coverage ends, you have eight months to sign up for Part B and 63 days to enroll in Part D without a penalty.

If you miss all enrollment windows, you must wait until the Medicare General Enrollment Period (January 1 – March 31) to sign up, and penalties will apply.

5. Conclusion

Failing to enroll in Medicare on time can result in costly lifetime penalties on your Part B and Part D premiums. To avoid these surcharges:

• Enroll during your Initial Enrollment Period at age 65, unless you have employer-based coverage.
• If you delay enrollment due to employer coverage, sign up as soon as that coverage ends to avoid penalties.
• Consider enrolling in Medicare Part D even if you don’t take prescriptions, as going without coverage can result in long-term financial consequences.

Understanding Medicare’s rules can help you avoid unnecessary costs and ensure you receive the healthcare benefits you need as you age. If you’re unsure about when to enroll, consult a Medicare specialist or insurance advisor for guidance.