If you miss signing up for certain parts of Medicare when you’re initially eligible, your monthly premiums might increase due to a Late Enrollment Penalty (LEP). Here we explore the LEPs for Medicare Part A, Part B, and Part D.
Part A Late Enrollment Penalty
If you don’t qualify for premium-free Part A and fail to enroll when first eligible for Medicare, your monthly premium may rise by 10%. You’ll be required to pay the higher premium for twice the number of years you didn’t sign up.
Example: If you were able to have Part A for 5 years but didn’t sign up and now purchase coverage, you’ll have to pay the Part A LEP for 10 years.
Part B Late Enrollment Penalty
Failing to enroll in Medicare Part B when you’re first eligible can lead to a 10% increase in your monthly premium for each 12-month period you could’ve had Part B but didn’t sign up. In most cases, you’ll have to pay this penalty each time you pay your premiums for as long as you have Part B.
Example: If your Initial Enrollment Period ended in December 2020, and you waited to sign up until March 2023 for a July 1, 2023 effective date, your Part B LEP is 20%. This is because you weren’t covered for 31 months, so this included 2 full 12-month periods.
Part D Late Enrollment Penalty
You may incur a penalty if, after your Initial Enrollment Period ends, there’s a period of 63 consecutive days or more without creditable drug coverage. Generally, you’ll have to pay the penalty for as long as you have Medicare drug coverage. The penalty is equal to 1% of the national base premium ($34.70 in 2024), multiplied by the number of full months you didn’t have Part D or creditable coverage, then rounded to the nearest $0.10 and added to your monthly Part D premium.
Example: If your initial enrollment period ended on July 31, 2020, and your Part D coverage began on January 1, 2023, since you were without coverage for 29 months, your penalty is $10.10 each month in 2024.
Avoiding a Penalty
The best way to avoid a Late Enrollment Penalty is to sign up for Medicare when first eligible. However, you can avoid the Part A and Part B LEP by having employer or union coverage based on your or your spouse’s current employment and signing up within 8 months of losing that coverage or employment, whichever happens first. For the Part D LEP, if you have creditable coverage, you can avoid the penalty by signing up before that coverage ends. Also, individuals with limited income and resources can receive financial assistance to help cover the cost of their Late Enrollment Penalties.
