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What Happens If You Pass Your Deadline for Medicare Part A?

Copyright © 2014 AARP. All rights reserved.

Here’s the good news: If you or your spouse paid enough payroll taxes while working, you automatically qualify for Medicare Part A services when you turn 65 and don’t need to pay premiums for them. And in that case, you can’t be charged any late penalty — even if you don’t formally enroll during your IEP or SEP.

However, you can be hit with late penalties if you could’ve gotten Part A services by paying monthly premiums for them but failed to enroll as soon as you were eligible. This trap is one that quite a lot of people fall into, mainly because they don’t realize they can buy into Part A if they haven’t managed to acquire enough work credits.

You’re eligible for Part A benefits by paying monthly premiums if you’re at least 65 and you’re either

  • A United States citizen

  • A legal resident (green card holder) who has lived in the United States for at least five years

In this situation, you’re liable for Part A late penalties if you don’t sign up before your personal enrollment deadline. That may be during your IEP. However, if you’re covered by health insurance from your own or your spouse’s current employer beyond age 65, you can delay enrolling in both Part A and Part B until this employment ends — by which time you may be entitled to a SEP to sign up for both without penalty.

Part A premiums are pretty expensive and penalties make this coverage even more costly. The Part A penalty is based on the same formula as the Part B penalty: It amounts to an extra 10 percent on your premiums for every full 12-month period that has elapsed between the end of your IEP and the end of the GEP in which you finally sign up — minus any time you were covered by group health insurance after age 65 from your (or your spouse’s) active employment.

The good news is that Part A penalties don’t go on forever, in the way Part B penalties do. You have to pay the Part A penalties for only double the length of time that you delayed signing up. So if the delay was two full years, you’d pay monthly penalties for four years; if you delayed five years, you’d pay penalties for ten years, and so on.

Also, the actual penalty amounts are calculated according to whether you’re required to pay the full Part A premium (based on having fewer than 30 work credits) or the reduced premium (30 to 39 work credits):

  • Full premium: In 2013, the full Part A premium is $441 a month, of which 10 percent is $44.10. So premium plus penalty in 2013 is $485.10 a month. If you’d delayed enrollment for two full years, you’d pay a penalty for four years but no longer. In each of these years, the penalty is 10 percent of the full Part A premium required for that year.

  • Reduced premium (30 to 39 work credits): In 2013, the reduced Part A premium is $243 a month, of which 10 percent is $24.30. So premium plus penalty in 2013 is $267.30 a month. If you’d delayed enrollment for three years, your penalty will continue for six years. In each of these years, the penalty is 10 percent of the reduced Part A premium required for that year.

For example, Craig assumed he didn’t qualify for Medicare when he retired at age 65 because he hadn’t earned enough credits from work. So he delayed enrollment for two years — waiting until his wife turned 62 to qualify on her work record. But when he went to sign up, he discovered he’d get late penalties for both Part A and Part B.

Even though he didn’t have enough work credits, he was still entitled to both Part A and Part B services at age 65 by paying premiums for them. Under the rules, he paid Part A penalties for four years but had to pay Part B penalties for the rest of his life.

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