What is the “Medicare Part B penalty,” and how does it work?

How is the late enrollment penalty for Medicare Part B calculated, and how long does it last?

If you don’t enroll in Medicare Part B (medical insurance) when you’re first eligible and you don’t have other creditable health coverage (like from an employer), you may face a late enrollment penalty. This penalty can add significant costs to your monthly premiums, and it lasts for as long as you have Medicare Part B.

Here’s how the penalty is calculated and how long it lasts:

1. How the Late Enrollment Penalty Is Calculated:

   • The late enrollment penalty is an additional 10% added to your Medicare Part B premium for every 12-month period you were eligible for Part B but didn’t sign up.

   • The penalty is based on the standard Part B premium, which is $174.70 per month in 2024 for most people. For every year you delay enrollment, the penalty increases by 10%. Here’s an example:

     • If you delay enrolling in Part B for 2 years, your monthly premium will include a 20% penalty (10% for each year of delay). In this case, you would pay 120% of the standard premium, meaning your monthly premium would be:

       • $174.70 + (20% of $174.70) = $209.64 per month.

2. How Long the Penalty Lasts:

   • The late enrollment penalty lasts for as long as you have Medicare Part B. This means you will continue to pay the penalty in addition to your monthly premium for the rest of your life, unless you qualify for a Special Enrollment Period or meet certain exceptions.

3. Special Enrollment Period (SEP):

   • You can avoid the late enrollment penalty if you qualify for a Special Enrollment Period (SEP). You may be eligible for a SEP if you had creditable coverage (such as employer-sponsored health insurance) when you were first eligible for Medicare. Once your creditable coverage ends (e.g., you retire or lose employer coverage), you have 8 months to enroll in Part B without incurring a late penalty.

4. Medicare Part B and Creditable Coverage:

   • To avoid the penalty, you need to make sure your existing health insurance qualifies as creditable under Medicare rules. If you are still working and covered by an employer-sponsored plan, your employer’s insurance may be considered creditable, allowing you to delay Part B enrollment without facing a penalty.

If you’re unsure whether you’ll face a Part B penalty or have questions about enrolling, a Tsunami Advisor can help guide you through your options. You can schedule an appointment here: Schedule an Appointment.