This past holiday season, I was in line for the airport counter, waiting to check a bag. A gentleman in front of me got frustrated when the customer agent said he had to pay more to check a bag because he hadn’t paid for it online beforehand.
The gentleman’s reaction reminded me of a Medicare beneficiary I encountered a while back. He’d decided not to enroll in Medicare Part B, which helps pay for doctor fees, outpatient treatment and preventive-care services, when he was first eligible.
At the time he declined his Part B benefits, he was in good health. He rarely saw a doctor, didn’t take prescription drugs and never had been admitted to a hospital. Part B carries a monthly premium (about $109 for most people in 2017), and the man didn’t think he should pay for something he didn’t need.
Several years later, his health declined and he wanted Part B. He signed up in March but learned that his coverage wouldn’t start until July. And since he waited five years to enroll after he was initially eligible (and didn’t have employer-based insurance during that time), he would have to pay a late penalty equal to 50 percent of his monthly premium.
He asked that the penalty be reduced, but it could not be. When the beneficiary turned down Part B five years prior, he signed a document explaining the penalty and the potential for higher costs. So now he had to pay this surcharge for as long as he had Part B.
So. why does Medicare have such penalties?
Like private insurance, Medicare spreads its costs across a pool of insured people. Late-enrollment penalties are meant to ensure that people join the risk pool when they’re healthy, not just when they get sick. Thus, premiums paid by healthy people help offset the costs of those with illnesses, keeping the program’s overall expenses as low as possible for everyone.
Late-enrollment penalties can add up. Your Part B premium may go up 10 percent for each full 12-month period that you could’ve had Part B but didn’t sign up for it. (You don’t usually pay a late penalty if you defer Part B while you’re covered by employer insurance.)
Late penalties also apply to Medicare Part A, which covers hospitalization. And you can get hit with a penalty for late enrollment in Medicare Part D, which helps pay for prescription drugs. For details, see the 2017 Medicare & You handbook, mailed to every person with Medicare in the fall. It’s also online at medicare.gov/pubs/pdf/10050-Medicare-and-You.pdf.
Or call 1-800-MEDICARE (633-4227) any time of day.
Greg Dill is Medicare’s regional administrator for Arizona, California, Hawaii, Nevada and the Pacific Territories.