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Medicare enrollment doesn’t come with many other opportunities. While most financial missteps can be corrected over time, this is one area where missed deadlines can lead to permanently higher costs.
GOBankingRates asked experts to describe how this one mistake could lead to thousands more people joining than expected and suggest how to avoid it.
The most common Medicare enrollment mistakes to avoid
Many seniors believe that they can delay enrollment without any consequences. However, according to senior advisor Brandon Hill, not enrolling in Medicare Part B or Part D when they should have done so is the most expensive Medicare insurance mistake people make. Beckett Financial Group.
Seniors must ensure that they do not have any time without medical or drug coverage once they become eligible for Medicare.
“If they have deficiencies, there could be penalties for late enrollment,” Hill said.
“Missing a Medicare deadline isn’t just a paperwork issue; it’s a permanent premium error,” said Evan H. Farr, a certified elder law attorney and retirement planner. Farr Law Firm, PC.
How the Medicare Late Enrollment Penalty Really Works
Late enrollment penalty can increase the monthly premium for life. The longer a person delays signing up for a program, the higher the penalty.
For example, Hill explained, if you waited a full two years to sign up for Part B after becoming eligible to enroll, didn’t have reliable coverage through work or elsewhere and didn’t qualify for the special enrollment period, you’ll have to pay a 20% late enrollment penalty and the standard Part B monthly premium.
He added that, for Part D, if you have a 63-day gap without reliable drug coverage elsewhere, you will be assessed a percentage for every month you did not have coverage.
Farr said the penalties for late enrollment are cumulative and permanent.
How one delay can turn into $8,000 or more in lifetime costs
Even a small delay can add up to thousands of dollars in penalties over time.
At today’s rate of about $175/month, delaying Part B enrollment by 12 months would result in about a 10% premium increase, Farr explained. That’s about an extra $17.50 per month.
“In 20 years, it could be more than $4,000, and that’s not including inflation.”
Part D penalties, which are often $10 to $30 a month depending on the length of delay, can add up to more than $8,000 to $15,000 in lifetime costs, Farr said.
“Major 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 not one enrollment period. Instead, there are multiple enrollment periods that overlap,” Farr said.
Hill said that “the government clearly doesn’t do a good job of making people aware of the penalties and enrollment periods.”
It’s not uncommon for people to assume they can wait until later to sign up without consequences, he said, or they can continue to use their employer, COBRA or retiree coverage.
Understanding Enrollment Periods Can Save You Thousands
Knowing the difference between enrollment periods is also one of the most effective ways to avoid penalties, Hill said. Your initial enrollment period lasts seven months, starting three months before you turn 65 and ending three months after you turn 65.
“If you don’t sign up during your special enrollment period, you’ll have to wait for the next regular enrollment period, and you may have to pay a monthly late enrollment penalty,” Hill explained.
Missing that window “is the difference between paying a fine for life,” Farr stressed.
Warning Signs You Could Be Heading Towards a Costly Mistake
Certain beliefs and behaviors may be indicative of a costly mistake coming your way, Hill said. Thinking that your health will remain intact or that you will not need medications – thus not needing to enroll in Medicare drug coverage – is a big mistake.
Farr said other risk factors include:
- Working over age 65 without coordinating an employer-sponsored plan with Medicare
- Using COBRA or Retirement Coverage
- No prescription drug coverage
- Assuming that automatic enrollment is correct
- Failing to actively monitor coverage changes upon retirement
What to do if you miss Medicare deadlines
Although penalties may not be completely reversible if you miss the deadline, taking prompt action can limit their increase over time.
“Enroll as soon as you can,” Hill said. “Consult with a Medicare professional for help with this and guidance on how and when to enroll.”
