Why are we being penalized all these years for signing up late for Medicare

[r280416r]

It's been 9 years that I've been charged approximately $140 out of my Social Security because unfortunately I was on Obamacare and then they said oh you can't use that you have to be on Medicare and you're late for signing up. So you need to be penalized 10% each month.

How many other people out there are going through the same thing I am and why are we still being penalized?

I could see a one-time late fee being charged,  but this is ridiculous. Once again the government just sucking up money from us older people who don't have much to get in the first place.

[GailL1]

Make sure that you aren't thinking that ALL the monthly deduction from your SS benefit for Part B is a penalty - the majority of it is the actual premium.  Currently (2020), the average premium for Part B is about $ 145 per month.  BUT if you are a higher income senior - the Part B premium and that 10% penalty of the premium amount will be higher.

So if you are an average earning senior on Medicare ($ 87,000 per year or less), your monthly Part B premium penalty for 2020 would be about $ 1.20 a month.

I came back to edit and add - The above has to also be multiplied by the number of months that you were late signing up.  Meaning that the penalty is (in this example) is $ 1.20 X (number of months you were without coverage and had no other credible coverage) - say 18 months.

$ 1.20 X 18 months = $ 21.60 would be added to your regular Part B premium.  Note also this penalty amount will increase over time as the premiums for Part B increase.

The reason why signing up on time is important for people who are eligible to sign up for Part B coverage in Medicare is because it is part of the overall plan of this coverage.  Part B is the Supplemental Medicare Insurance (SMI) part of Medicare and IS NOT covered by payroll taxes. It helps pay for doctor visits and other more everyday kind of medical things not covered by Part A.

The way it is paid for is (1) by premiums paid by beneficiaries - representing about 25% of the total cost of the program (2)  the other 75% cost of the program is paid out of the General Fund of our government.

So during that time when you weren't paying, those that were paying were paying more.  You are just paying back with the penalty. 

If you think that it was a mistake for which you had no control - like perhaps your Obamacare plan had your wrong age erroneously - give the reason why you are paying a (forever) penalty and I may be able to offer you some suggestions to get it fixed.

[trobin47]

I am in a little bit different boat. I did not enroll in part B when I became eligible because I have insurance thru my husbands federal retirement. My beef with the penalty is that although we aren't paying during the time we didn't have part B (because we didn't need to have it) we also were not submitting claims.  It doesn't make sense to me.

[EliteInsPartners]

I know the Part D penalty is 1% per month, but I think the Part B penalty is 10% per 12-month period. So if you delayed for 18 months, you would only be penalized for 12-months.

[GailL1]

Yes, the Part B penalty is 10% per 12 month period but the computations all depends on when the count starts and I do believe that it can be increments of months in a 12 month period too.

When 1st eligible for Part B and when there is no other credible coverage in place, you have an INITIAL ENROLLMENT PERIOD (IEP) - this is (3) months BEFORE your 65th birthday and it continues to (3) months AFTER your 65th birthday.

The penalty month count does not even start until the end of that IEP, meaning (3) months after a person turns 65.

To further complicate the matter, if a person misses this IEP and has no other appropriate coverage in place, there is ONLY a specific time period that the person can then sign up for Part B. January 1 - March 31 of the following year; this is the General Enrollment Period (GEP). Even if a person signs up during this GEP, their actual coverage does not begin until the following July.

SSA.gov - Medicare Part B Sign Up

from the link ~

In most cases, if you don’t enroll in Part B now [during the IEP], you will have to pay a late enrollment penalty for as long as you have Part B. You will have to wait until the next General Enrollment Period (from January 1 through March 31) to enroll in Part B and coverage will begin July 1 of that year. The penalty increases the longer you go without Part B coverage.

. . . . Can I enroll later?If you don’t sign up for Medicare Part B now [during the IEP], you may have to wait until the next General Enrollment Period, (January 1 through March 31 of each year) to sign up. Your coverage will start July 1 of that year and you’ll have to pay a late enrollment penalty. The penalty increases the longer you go without Part B coverage and you will pay 10% more for each 12-month period you could have had Part B but didn’t take it.

Here’s an example:

If you waited 2 full years (24 months) to sign up for Part B and didn’t have other coverage, you’ll have to pay a 20% late enrollment penalty (10% for each full 12-month period that you could have been enrolled), plus your standard Part B monthly premium ($134.00 in 2017).

$134.00 (2017 Part B standard premium)+ $26.80(10% [of $134.00] for each full 12-month period you could have had Part B) $160.80will be your Part B monthly premium for 2017. This amount is rounded to the nearest $.10 and includes the late enrollment penalty.

Note: The example above applies if you delayed enrolling in Part B for 24 months. You don’t pay a late enrollment penalty if you enroll before the first full 12-month period has passed or if you qualify for a Special Enrollment Period.

You’ll have to pay this late enrollment penalty as long as you have Part B

Just hitting that even 12-month penalty period would be hard - but that is gonna depend on your birthday date + (3) months after + how long to Jan.1 - March 31 + to July when the coverage starts.

It is my understanding that even though it says the penalty is 10% for a 12 month period, I believe that it is prorated by number of months that a person was without Part B coverage (and no other coverage that worked).

The reason that it increases is that the Part B premiums go up on an annual basis over time - unless restricted by the SS/Medicare law (hold-harmless provision).

[fffred]

@GailL1 

Thank you for that great explanation, Gail. Especially indicating the actual amount of the penalty.

[GailL1]

I edited my post for clarity -

Here is how SSA describes the computation - Go down to the part that is headed "Can I enroll later?"

https://secure.ssa.gov/apps10/public/pomsimages.nsf/gfx_num/G-HI_00805.126C/$File/G-HI_00805.126C.pd... 

Math is not my strong part especially with SSA and Medicare doing the describing.

somarco is the expert.