How to avoid the Medicare Part B late penalty

Medicare Part B pays 80 percent of outpatient health care costs and 100 percent for many preventive services. But it pays to think carefully about when to sign up. Here’s why.

• Part B comes with a monthly premium. You could save money if you delay enrollment.
• Part B charges a late penalty. In some cases, you could pay more if you sign up after your eligibility date.

In order to avoid the Part B late penalty, you need to first figure out when you have to enroll. Let’s look at some situations that can help you answer whether you need Part B at age 65 or if you can delay enrolling. 

You may not need Part B when you first become eligible for Medicare. Work status and other factors have an impact on whether it makes sense for you to sign up and when. Find the situation that best matches yours below, and learn about signing up for Part B.

• I am receiving Social Security retirement or Railroad Retirement Board benefits

  You will be enrolled in Original Medicare (Parts A & B) automatically when you turn 65. You’ll get your Medicare card in the mail. Coverage usually starts the first day of your 65th birthday month.

  If you have other creditable coverage, you can delay Part B and postpone paying the premium. You can sign up later without penalty, as long as you do it within eight months after your other coverage ends. If you don’t qualify to delay Part B, you’ll need to enroll during your Initial Enrollment Period to avoid paying the penalty. You may refuse Part B without penalty if you have creditable coverage, but you have to do it before your coverage start date. Follow the directions on the back of your Medicare card if you want to refuse Part B.

• I have an employer health plan through my job (or my spouse’s job)

  You may be able to delay Part B enrollment if all of the following statements are true.

  • Your health insurance is through your own or a spouse’s current job.
  • The employer has 20 or more employees.
  • Your employer plan provides creditable coverage.

  You may qualify for a Special Enrollment Period when your employer coverage ends if you meet these qualifications. You’ll have eight months to sign up for Part B without penalty. You can also and sign up for Part A if you haven’t already.

  If you have coverage from a small company with fewer than 20 employees, you’ll likely need to enroll in Medicare Parts A & B when you turn 65. Small workplaces are not required to continue your health care coverage once you’re eligible for Medicare.

  NOTE: If you have health coverage through your spouse’s employer, regardless of the employer’s size, you may need to enroll in Medicare in order to stay on the employer plan as a dependent. Check with the employer about their rules for covering Medicare-eligible spouses.

• I have COBRA coverage

  COBRA lets you keep your employer health coverage for a limited time after your employment ends. There are two situations that can happen with COBRA and Medicare, and it depends on which you get first. 

  Situation 1: If you get COBRA first.

  Usually you can’t keep COBRA once you become eligible for Medicare. You’ll want to sign up for Medicare Part A and Part B when you turn 65, unless you have access to other creditable coverage However, you may be able to keep parts of COBRA that cover services Medicare doesn’t, such as dental care. 

  Your spouse and dependents may be able to continue COBRA coverage after you enroll in Medicare. Talk with your plan benefits administrator about your needs and options.

  Situation 2: If you get Medicare first.

  In this case, you are allowed to enroll in COBRA as well. It’s not required, and COBRA would act as your secondary insurance. 

• I am receiving Social Security disability benefits

  You will be enrolled in Original Medicare (Parts A & B) automatically when you become eligible for Medicare due to disability. You’ll get your Medicare card in the mail. Coverage usually starts the first day of the 25th month you receive disability benefits.

  You may delay Part B and postpone paying the premium if you have other creditable coverage. You’ll be able to sign up for Part B later without penalty, as long as you do it within eight months after your other coverage ends.

  You’ll need to inform Medicare of your decision before your Part B coverage starts. Follow the directions on the back of your Medicare card.

• I have VA health care benefits

  VA benefits cover care you receive in a VA facility. Medicare covers care you receive in a non-VA facility. With both VA benefits and Medicare, you’ll have options for getting the care you need.

  It’s usually a good idea to sign up for Medicare Part B when you become eligible. VA health care benefits do not qualify as creditable coverage. You may have to pay a penalty if you delay Part B enrollment, unless you have other creditable coverage such as through an employer.

• I have retiree health coverage

  You may or may not have to sign up for Part B when you turn 65, depending on your retiree coverage and plan rules. All retiree plan members must enroll in Part A.

  Speak with your retiree plan administrator about the benefits and costs of your plan as well as other coverage choices you have once you’re on Medicare.

  Depending on which of the above situations applies to you, getting Part B may be necessary at age 65 or you may be able to delay. Take your time to ask questions and consider what is best for you.