What’s the big deal? Let’s talk about the potential penalties, both the prescription drug plans and the Part B have potential penalties for not enrolling.
Usually the individual being assessed these penalties is caught totally off guard.
* Part B Penalty: If not enrolled when first eligible for Medicare, outside of continuing to work and being covered under the employer’s group plan, the monthly premium may go up 10% for each 12-month period that the Part B eligible individual was not enrolled. In most cases, this penalty is withheld along with the Part B premium after the enrollment begins.
Usually, a late enrollment penalty is avoided if you meet certain conditions that allow you to sign up for Part B during a Special Enrollment period.
Case #1: Client joined Medicare in 2007 and did not enroll in a drug plan. They felt the additional $10 monthly expense for the plan was not necessary. Fast forward to 2020 and two chronic conditions later, the medications were costing over $8,000 annually. The client came to me for help and options. The best option was to pay the Federal government’s assessed penalty of $55 per month, in addition to the regular monthly premium of $65 for a prescription plan which made their medications affordable.
$55 + $65 = $120 x 12 months = $1,440 (cost of the prescription plan, plus the penalty). The cost savings, minus the small copays for the medications, save this client over $6,000 annually.
Case #2: Client enrolled in Medicare Part A (hospitalization) only at age 65 while still employed until age 75. The client relied upon his employer sponsored group coverage until age 75. He then enrolled in Part B without penalty thanks to maintaining credible coverage between ages 65 and 75.
Without maintaining credible coverage between age 65 and 75, the penalty would have been: 10% per year x 10 years - 100%. The Part B premium alone would have been double the $148.60, which is $297.20.
