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The following description of Medicare penalties came from the Medicare.gov website. Any verbiage in green is added by me in an attempt to make the information more understandable.

Part A late enrollment penalty

If you aren't eligible for premium-free Part A, and you don't buy it when you're first eligible, your monthly premium may go up 10%. You'll have to pay the higher premium for twice the number of years you could have had Part A, but didn't sign up.

If you or a spouse of 10 years or more worked for 40 quarters (10 years), you do not have to pay for Part A of Medicare.

Example

If you were eligible for Part A for 2 years but didn't sign up, you'll have to pay the higher premium for 4 years. Usually, you don't have to pay a penalty if you meet certain conditions that allow you to sign up for Part A during a special enrollment period.

 

Part B late enrollment penalty

In most cases, if you don't sign up for Part B when you're first eligible, you'll have to pay a late enrollment penalty. You'll have to pay this penalty for as long as you have Part B. Your monthly premium for Part B may go up 10% for each full 12-month period that you could have had Part B, but didn't sign up for it. Also, you may have to wait until the General Enrollment Period (from January 1 to March 31) to enroll in Part B. Coverage will start July 1 of that year.

Usually, you don't pay a late enrollment penalty if you meet certain conditions that allow you to sign up for Part B during a Special Enrollment Period. When you have credible insurance coverage elsewhere, you are not penalized when signing up for Part B. However, you must do so within 63 days of losing coverage.

If you have limited income and resources, your state may help you pay for Part A, and/or Part B. You may also qualify for Extra Help to pay for your Medicare prescription drug coverage.

 

How much is the Part D penalty?

The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage. When you have credible prescription drug insurance coverage elsewhere, you are not penalized when signing up for Part D. However, you must do so within 63 days of losing coverage.

 

Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($35.63 in 2017; $35.02 in 2018) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.

The national base beneficiary premium may increase each year, so your penalty amount may also increase each year.

Example

Mrs. Martinez is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2014. She doesn’t have prescription drug coverage from any other source. She didn’t join by May 31, 2014, and instead joined during the Open Enrollment Period that ended December 7, 2016. Her drug coverage was effective January 1, 2017.

2017

Since Mrs. Martinez was without creditable prescription drug coverage from June 2014–December 2016, her penalty in 2017 is 31% (1% for each of the 31 months) of $35.63 (the national base beneficiary premium for 2017) or $11.05. Since the monthly penalty is always rounded to the nearest $0.10, she pays $11.10 each month in addition to her plan’s monthly premium.

Here's the math:

.31 (31% penalty) × $35.63 (2017 base beneficiary premium) = $11.05

$11.05 rounded to the nearest $0.10 = $11.10

$11.10 = Mrs. Martinez's monthly late enrollment penalty for 2017

2018

In 2018, Medicare will recalculate Mrs. Martinez’s penalty using the 2018 base beneficiary premium ($35.02). So, Mrs. Martinez’s new monthly penalty in 2018 will be 31% of $35.02 or $10.86 each month. Since the monthly penalty is always rounded to the nearest $0.10, she pays $10.90 each month in addition to her plan’s monthly premium.

Here's the math:

.31 (31% penalty) × $35.02 (2018 base beneficiary premium) = $10.86

$10.86 rounded to the nearest $0.10 = $10.90

$10.90 = Mrs. Martinez's monthly late enrollment penalty for 2018

How do I know if I owe a penalty?

After you join a Medicare drug plan, the plan will tell you if you owe a penalty and what your premium will be. In general, you'll have to pay this penalty for as long as you have a Medicare drug plan.

What if I don't agree with the late enrollment penalty?

You may be able to ask for a "reconsideration." Your drug plan will send information about how to request a reconsideration.

Complete the 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 telling you that you owe a late enrollment penalty. Also send any proof that supports your case, like a copy of your notice of creditable prescription drug coverage from an employer or union plan.

Do I have to pay the penalty even if I don't agree with it?

By law, the late enrollment penalty is part of the premium, so you must pay the penalty with the premium. You must also pay the penalty even if you've asked for a reconsideration. Medicare drug plans can disenroll members who don't pay their premiums, including the late enrollment penalty portion of the premium.

How soon will I get a reconsideration decision?

In general, Medicare’s contractor makes reconsideration decisions within 90 days. The contractor will try to make a decision as quickly as possible. However, you may request an extension. Or, for good cause, Medicare’s contractor may take an additional 14 days to resolve your case.

What happens if Medicare's contractor decides the penalty is wrong?

If Medicare’s contractor decides that all or part of your late enrollment penalty is wrong, the Medicare contractor will send you and your drug plan a letter explaining its decision. Your Medicare drug plan will remove or reduce your late enrollment penalty. The plan will send you a letter that shows the correct premium amount and explains whether you'll get a refund.

What happens if Medicare's contractor decides the penalty is correct?

If Medicare’s contractor decides that your late enrollment penalty is correct, the Medicare contractor will send you a letter explaining the decision, and you must pay the penalty.

 

Insurance Deadlines

Medigap (Supplemental insurance) rules – Insurance companies are required to offer you for a period of 6 months any Medicare policy they offer when you are at least 65 years of age and have Part B of Medicare. The time period begins the month that you first obtain Part B and are at least 65 years old. The insurance companies are not allowed to ask any medical questions during this Open Enrollment period. After the Open Enrollment, the insurance company may ask any medical questions they choose, and may elect not to offer coverage.

 

Even though you may have a Medicare policy in force, the rule above still holds true. The insurance company must continue with your policy as long as you pay the premiums. But, they do not have to allow you to switch to another policy without asking medical questions first.

 

Medicare Advantage Rules – You may enroll in a Part C, Medicare Advantage plan, three months prior to the month you have both Parts A & B, the month of obtaining them, and three months following the month of obtainment. You may disenroll from a Medicare Advantage Plan any month during the first 12 months enrolled. After the first 12 months, you may make enrollment changes during the Annual Enrollment Period (October 15 through December7) for the upcoming year.

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