The Medicare Part B Penalty That Can Follow Retirees for Life

Some penalties are only incurred once, such as the 10% penalty for an early withdrawal from a retirement plan. But a Medicare Part B penalty can follow you around for the rest of your life.

If you enroll late in the federal health insurance program, you’ll face a late enrollment penalty, and it will never drop to a pre-penalty level for as long as you have that insurance (potentially, for the rest of your life). Understanding this penalty and how to avoid it can shield you from an unnecessary expense.

What is the Medicare Part B late-enrollment penalty?

Medicare Part B covers medical costs such as what you would have to pay for doctor visits, outpatient care and preventive services. It comes with a premium.

The premium is typically deducted from your Social Security benefit, but you will be billed directly if you do not yet receive Social Security. You typically don’t have to re-enroll in Medicare Part B each year, but a late enrollment will trigger a 10% penalty for each full 12-month period that you could have had Part B but did not enroll.

A two-year delay could mean a 20% penalty gets added to the standard Part B premium. You may be able to delay coverage without penalty if you already have qualifying coverage through your current employer, but waiting too long can result in an excessive penalty that never goes away.

Who is most at risk of getting hit

Anyone who delays Medicare coverage without an eligible health insurance policy is at risk. People who turn 65 who haven’t claimed Social Security may have to actively enroll in Medicare. And not all COBRA, retiree health benefits or marketplace coverage is enough to let them delay Part B without consequences.

Speaking with a professional — such as a medicare agent or State Health Insurance Assistance Programs (SHIP) counselor — about whether your coverage is enough to delay Part B can be a good idea. You can ask if your current coverage is sufficient and if you can delay Medicare Part B without a penalty.

How to avoid or reduce the damage from a penalty

You can avoid the penalty by enrolling in Medicare during the initial enrollment period. This period starts three months before you turn 65 and ends three months after that month. For example, if you turn 65 in June, your initial enrollment period is from March 1 to September 30.

If you already have health coverage, you contact Medicare and get written confirmation that your coverage qualifies you for a special enrollment period later. Be sure to keep any records about your current health coverage in case you have to demonstrate to Medicare that you do not have to pay the premium.

Anyone with limited income can qualify for a Medicare Savings Program, which can help some people avoid the Part B penalty. Even if you have a sufficient income and enroll late, you can still minimize the damage. Enrolling shortly after missing the deadline can prevent the penalty from growing and make it more manageable.