What Is the Late Enrollment Penalty for Medicare?

Medicare late enrollment penalties are additional costs applied to monthly premiums for individuals who do not enroll in Medicare coverage when first eligible. These penalties encourage timely enrollment and help ensure continuous health and prescription drug coverage. Understanding these penalties is important, as they can lead to permanently higher monthly costs. Penalty rules vary depending on the Medicare part: Part A (Hospital Insurance), Part B (Medical Insurance), and Part D (Prescription Drug Coverage).

When Penalties Apply

Late enrollment penalties for Medicare apply when an individual misses their Initial Enrollment Period (IEP) without other qualifying health coverage. The IEP is a seven-month window: three months before turning 65, the birth month, and three months after. Missing this period without a valid reason can trigger additional costs.

Part A

Most individuals do not pay a monthly premium for Medicare Part A, which covers hospital insurance, because they or their spouse paid Medicare taxes through employment. Therefore, a late enrollment penalty for Part A is uncommon for the majority of beneficiaries. However, for those who must pay a premium, a penalty applies if enrollment is delayed. The monthly premium may increase by 10% for twice the number of years enrollment was delayed after initial eligibility.

Part B

Medicare Part B, covering medical services and outpatient care, incurs a late enrollment penalty if not elected during the IEP. This penalty is imposed for each full 12-month period an individual was eligible for Part B but did not enroll and lacked other qualifying health coverage. Delayed enrollment may require waiting for a General Enrollment Period (GEP), which runs from January 1 to March 31 each year, with coverage starting the month after enrollment. This can result in a gap in coverage and the imposition of a penalty.

Part D

For Medicare Part D, which provides prescription drug coverage, a penalty applies if there is a continuous period of 63 days or more without Part D or other creditable prescription drug coverage after the IEP. Creditable coverage is prescription drug coverage expected to pay at least as much as Medicare’s standard coverage. This coverage can come from a current or former employer, union, or other sources. Individuals should receive a notice from their plan indicating if their coverage is creditable.

How Penalties are Calculated

Late enrollment penalties for Medicare Part B and Part D are calculated differently, impacting the additional amount added to monthly premiums. Calculations depend on the duration of delayed enrollment.

Part B Calculation

The Medicare Part B late enrollment penalty adds 10% of the standard Part B premium for each full 12-month period enrollment was delayed. This percentage applies to the standard premium, not an income-adjusted premium, and is then added to the monthly premium. For example, if the standard Part B monthly premium for 2025 is $185.00, a two-year delay (24 months) results in a 20% penalty ($37.00 per month). The total monthly Part B premium would be $222.00 ($185.00 + $37.00).

Part D Calculation

The Medicare Part D late enrollment penalty is 1% of the national base beneficiary premium for each full, uncovered month without Part D or creditable drug coverage. The national base beneficiary premium changes annually; for 2025, it is $36.78. The total penalty is rounded to the nearest ten cents. For instance, a 15-month delay without creditable coverage results in a 15% penalty. Using the 2025 premium, this is $36.78 x 0.15, or approximately $5.52, which rounds to $5.50 per month added to the Part D premium.

How Long Penalties Last

Medicare late enrollment penalties are ongoing. For Medicare Part B, the penalty is permanent. Once applied, it remains an additional charge on the monthly premium as long as the individual maintains Part B coverage.

The Medicare Part D late enrollment penalty is also permanent. This penalty is added to the monthly Part D premium and continues as long as the individual has Medicare drug coverage. Even if an individual switches plans, the penalty transfers. The penalty amount can fluctuate annually because it is based on the national base beneficiary premium.

Circumstances Affecting Penalty Application

Certain situations allow individuals to delay Medicare enrollment without incurring late enrollment penalties. These conditions apply when beneficiaries have alternative coverage that meets Medicare’s requirements.

Special Enrollment Periods (SEPs)

Special Enrollment Periods (SEPs) allow individuals to sign up for Medicare Part B (and sometimes premium Part A) without penalty if they delayed enrollment due to group health coverage through current employment. This applies whether coverage is from their own or a spouse’s employment. The SEP lasts for eight months after employment or group health plan coverage ends, whichever comes first.

Low-Income Subsidy (Extra Help)

Individuals who qualify for the Low-Income Subsidy, also known as Extra Help, for Medicare Part D are exempt from the Part D late enrollment penalty. This federal assistance program helps eligible beneficiaries with prescription drug costs, including premiums, deductibles, and co-insurance.

Creditable Prescription Drug Coverage

Maintaining creditable prescription drug coverage is another way to avoid the Part D late enrollment penalty. If an individual has drug coverage from another source, such as an employer or union plan, that is considered at least as good as Medicare Part D, they can delay enrollment without penalty. Employers and plan sponsors must notify members annually if their prescription drug coverage is creditable. If this coverage is lost, individuals must enroll in a Part D plan within 63 days to avoid a penalty.