The Medicare Enrollment Mistake Costing Seniors $8,000 in Lifetime Penalties
Written by
Jordan Rosenfeld
Edited by
Angela Corry
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Medicare enrollment doesn’t come with many second chances. While most financial missteps can be corrected over time, this is one area where missed deadlines can permanently lock in higher costs.
GOBankingRates asked experts to describe how this one mistake can add up to thousands more than expected and suggest how to avoid it.
The Most Common Medicare Enrollment Mistake to Avoid
Many seniors assume they can delay enrollment without consequences. However, by not enrolling in Medicare Part B or Part D when they’re supposed to is the most expensive medical insurance mistake people make, according to Brandon Hill, senior advisor at Beckett Financial Group.
Seniors need to make sure they do not have any periods of time without medical or drug coverage after they are eligible for Medicare.
“If they have gaps, that can lead to late enrollment penalties,” Hill said.
“Missing Medicare deadlines is not just a paperwork issue; it is a permanent premium error,” added Evan H. Farr, a certified elder law attorney and retirement planner at Farr Law Firm, P.C.
How Medicare Late Enrollment Penalties Actually Work
Late enrollment penalties can increase monthly premiums for life. The longer someone delays signing up for a program the more those penalties grow.
For example, Hill explained, if you waited two full years to sign up for Part B after you were eligible to enroll, did not have creditable coverage through work or elsewhere and didn’t qualify for a special enrollment period, you’ll have to pay a 20% late enrollment penalty plus the standard Part B monthly premium.
For Part D, if you have a gap of 63 days without creditable drug coverage elsewhere, you’ll be assessed a percentage for every month that you did not have coverage, he added.
The late enrollment penalties are cumulative and permanent, Farr said.
How a Delay Can Turn Into $8,000 or More in Lifetime Costs
Even a small delay can snowball into thousands of dollars over time through penalties.
Farr explained, that a 12-month delay in Part B enrollment at today’s rate of around $175/month would add approximately a 10% premium increase. That is approximately an additional $17.50 per month.
“Over 20 years, that could be over $4,000, and that doesn’t account for inflation.”
A Part D penalty, which is often $10 to $30 per month depending on the length of the delay, could exceed $8,000 to $15,000 in lifetime costs, Farr said.
“Larger delays or income-based surcharges could push that number even higher.”
Why So Many People Misunderstand Medicare Enrollment Timing
People often misunderstand the timing of enrollment in Medicare because “there is no single enrollment period. Instead, there are multiple enrollment periods that overlap,” Farr said.
Hill added that “the government frankly does not do a good job of making people aware of the penalties and enrollment periods.”
It’s not uncommon for people to assume they can simply wait until later to sign up without consequences, or that they can continue to use their employer, COBRA or retiree coverage, he said.
Understanding Enrollment Periods Can Save You Thousands
Knowing the difference between enrollment periods is also one of the most effective ways to avoid penalties altogether, Hill said. Your initial enrollment period lasts for seven months, starting three months before you turn 65 and ending three months after the month you turn 65.
“If you don’t sign up during your special enrollment period, you’ll have to wait for the next general enrollment period, and you might have to pay a monthly late enrollment penalty,” Hill explained.
Missing that window “is the difference between paying a penalty for life,” Farr stressed.
Warning Signs You May Be Headed Toward a Costly Mistake
Certain assumptions and behaviors can be signs of a costly mistake coming your way, Hill said. Thinking your health will persist or that you won’t need medications — thus don’t need to enroll in Medicare drug coverage — is a big mistake
Farr said other risk factors include:
- working beyond age 65 without coordinating an employer-sponsored plan with Medicare
- using COBRA or retiree coverage
- not having prescription medication coverage
- assuming automatic enrollment is correct
- failing to proactively monitor coverage changes at retirement
What to Do If You Miss a Medicare Deadline
While penalties may not be fully reversible if you miss a deadline, acting quickly can limit how much they grow over time.
“Enroll as soon as possible,” Hill said. “Consult a Medicare professional to assist with this and provide guidance on how and when to enroll.”
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