Late-enrollment fees hit some Medicare beneficiaries. A congressional bill would warn people of those charges before they happen

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A recently introduced bill in Congress has its sights set on preventing a cost that some new Medicare beneficiaries face: late-enrollment penalties.

The bipartisan measure, introduced in the Senate, would require the federal government to provide individuals with information about Medicare enrollment rules before they reach the Medicare-eligible age of 65. While many beneficiaries are automatically enrolled at that point because they are on Social Security, that’s not the case for everyone. 

“More people are working later in life, delaying Social Security and not getting auto-enrolled,” said Lindsey Copeland, federal policy director for the Medicare Rights Center, an advocacy group. “They might need to actively enroll and [understand] what can happen if they don’t.”

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The government insurance program has roughly 63.3 million beneficiaries, the majority of whom are at least age 65. Most people pay no premium for Part A (hospital coverage) and pay a standard monthly premium ($170.10 in 2022) for Part B (outpatient care).

The share of older people who aren’t auto-enrolled in Medicare has risen over time, according to a 2019 report from the Medicare Payment Advisory Commission. In 2016, 40% of individuals eligible for Medicare at age 65 had to actively enroll, compared with just 8% in 2002.

While there are no late-enrollment penalties related to Part A, the same can’t be said for signing up late for Part B. That penalty, which equates to 10% of the standard Part B premium for each 12 months that you should have been enrolled but were not, also can increase each year as the premium adjusts annually.  And, the penalties are life-lasting.

Although the Part B penalty hits a small share of beneficiaries — an estimated 776,200 in 2020 — the average penalty increased their monthly premium by 27%, according to the Medicare Rights Center. Based on this year’s $170.10 premium, that would mean an additional $45.93 monthly, or $216.03 total.

Part of the problem, critics say, is that Medicare enrollment rules can be confusing and easily misunderstood. For example, although you’re allowed to delay Part B enrollment at age 65 if you have qualifying insurance elsewhere — i.e., through your employer — there are still deadlines to meet once that coverage ends if you want to avoid late-enrollment penalties.

Of course, you can appeal the charges, although your enrollment mistake must be due to someone in government providing you with inaccurate information.

Part D, which is prescription drug coverage, also comes with a late-enrollment penalty: 1% of the national base premium —$33.37 in 2022 — multiplied by the number of months you didn’t have Part D or creditable coverage. It, too, lasts for as long as you have Part D.

The new Senate bill calls for including information on Social Security statements, beginning at age 60, that details the rules for Medicare enrollment so that older individuals are getting educated about their responsibilities for signing up. In other words, assuming they read at their Social Security statement — which is more likely in this age group as they near retirement — they’d see the information repeatedly before they actually have to enroll.

The measure was included in 2020 legislation that addressed other issues with Medicare enrollment, including some gaps between signing up and actually having coverage. The provision was in the House-passed version but was dropped in the Senate and excluded from final passage.

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