Signing up for Original Medicare is a voluntary decision but doing so is usually advisable based on the numerous advantages you will enjoy as a beneficiary and people who enroll after their initial date of eligibility are often penalized.
When to apply for Medicare
It is typically best to enroll in Medicare when you first become eligible as signing up late usually attracts a penalty which will lead to avoidable extra expenses. This is not always the case though. For those who may still have creditable coverage through an employer based group or retiree plan may be exempt from paying the Part B late enrollment period. Criteria for eligibility for Medicare varies depending on age, work, diseases or disability.
When do you become eligible?
Work history: Individuals who have worked (or whose spouses have worked) for at least 10 years and have been paying Medicare taxes through their employment are eligible for premium-free Medicare Part A. If this is your case, you should be automatically enrolled into Part A of Medicare. Those who do not meet the above work history requirement become eligible for Medicare Part A although the insurance will not be premium free for those under this category.
Age: Individuals above age 65, and those who are under age 65 but who are eligible for Social Security disability benefits and are in their 25th month of eligibility are eligible for Original Medicare.
Disability: You will be automatically enrolled into Parts A and B if you are permanently disabled and have been enjoying disability benefits from Social Security or certain disability benefits from Railroad Retirement Board for a period not less than 24 months.
Disease: People with End-Stage Renal Disease (ESRD) are automatically enrolled once the condition has been verified with the physician. Also, people who have Amyotrophic Lateral Sclerosis (ALS) automatically enjoy Part A and B enrollment once their disability benefits begin.
What are the Penalties for Late Enrollment?
Late enrollment penalties vary depending on several factors including how long the individual was without coverage but eligible, the reason for the lack of coverage, and the type of penalty (i.e. Part B or Part D.)
Part B Late Enrollment Penalty
For those that are eligible to enroll into Part B and fail to sign up for the plan immediately, a late enrollment penalty may be added to the Part B premium once enrolled. The penalty for Part B is paid as long as one is on the plan – there is no cap. The penalty to be paid is 10% of your premium for every 12 months in which you were eligible for Medicare Part B but delayed signing up. For example, if you sign up two years after your eligibility date, you will be required to pay your Part B monthly premium plus an additional 20% of the premium (10% x 2 years) for as long as you have Medicare Part B.
Part D Prescription Drug Plan Late Enrollment Penalty
Part D covers insurance for prescription drugs. If you fail to sign up for a Part D Prescription Drug Plan or do not have prescription drug coverage built into your Medicare Advantage plan at the expected time (Part D Initial Enrollment Period), a late enrollment penalty may be charged unless you are eligible for extra help or have other creditable coverage. The penalty depends on the period of time for which you were without the plan and the national base beneficiary premium, which could lead to yearly variation in the penalty. 1% of the national base beneficiary premium is multiplied by the number of months between eligibility and eventual enrollment. The plan usually extends throughout the time a beneficiary remains on the plan.