It's that time of year folks -- Americans are getting into the holiday spirit, and snow has returned to the Northeast. It's also the time of the year when the roughly 56 million eligible Medicare beneficiaries, most of whom are ages 65 and up, have the option to enroll in the various components of Medicare.
Miss these deadlines and you'll probably regret it
Medicare is made up of a number of parts that gel together to cover our nation's elderly. It includes:
- Part A (hospital insurance)
- Part B (outpatient services)
- Part D (prescription drug plan)
- Supplemental insurance plan (an optional component that can reduce out-of-pocket costs)
There are essentially two major enrollment periods for Medicare. First, there's the initial enrollment period, or IEP, which is seven months long. It includes the three months prior to the month a person turns 65, the month they do turn 65, and the three months following the month they turn 65.
There's also the traditional Oct. 15 through Dec. 7 enrollment period we're in now when existing beneficiaries can change prescription drug plans and switch between original Medicare and an alternative plan offered by private insurance companies known as Medicare Advantage (also known as Part C).
However, you'll note that the end of this all-important enrollment period is now just days away. If you wind up missing the Wednesday, Dec. 7 deadline, or your initial enrollment period, you'll probably regret it, perhaps for the rest of your life.
You can kiss Medicare Advantage goodbye for the year
For starters, if you fail to enroll by Dec. 7 you'll miss out on your opportunity to purchase a Medicare Advantage plan in 2017. Medicare Advantage plans have grown significantly in popularity over the past decade. Whereas only 13% of eligible beneficiaries chose a Part C plan in 2005, some 30% did so in 2015.
The greatest allure of Medicare Advantage plans is that they have annual out-of-pocket limits for what would normally be covered under Part A and Part B of original Medicare, thus giving seniors some degree of confidence as to what their maximum medical costs could be. Original Medicare has no out-of-pocket limit, which is where a supplemental insurance plan could come into pay.
Medicare Advantage plans are also lauded for their convenience and compactness. Instead of potentially enrolling in multiple plans with original Medicare (Part A, B, and D), Medicare Advantage plans are structured such that all coverage fits neatly under one umbrella, and can be purchased as such. Part C also comes with the option of dental, hearing, and vision coverage, which isn't something that's covered, or can be purchased, under original Medicare.
Though a special enrollment period exists between Jan. 1 and Feb. 14 each year that allows eligible people to unenroll from a Medicare Advantage plan and enroll in an original Medicare plan without any penalties, this is a one-way street. Consumers are not allowed to unenroll from original Medicare and sign up for a Part C plan during this period.
Prepare to pay some long-term penalties
However, missing out on the possibility of enrolling in a Medicare Advantage plan could be the least of your concerns. The crushing blow comes in the form of penalties for not enrolling in Part B and Part D during your initial enrollment period (or subsequent years after missing your initial enrollment period). Keep in mind there are also special enrollment periods for certain mitigating circumstances that could allow you to avoid these penalties, which we'll look at closer a bit later.
The penalty for Part D works out to 1% of the national base beneficiary premium ($35.63 in 2017) multiplied by the number of consecutive months you went without a prescription drug plan. As an example, if you missed 12 months of coverage your penalty would be .12 (representing the 12 months) X $35.63 (the 2017 base beneficiary premium) = $4.28. The total is then rounded to the nearest $0.10, or $4.30 in our example. This is the monthly part D penalty you'd be responsible for if you missed a full year of Part D coverage.
But it gets worse. This penalty will follow you around for as long as you're enrolled in Medicare (i.e., for the rest of your life), and it could increase on a year-over-year basis since the base beneficiary premiums increase with the inflation rate. For instance, it was $34.10 in 2016 and is now $35.63. Missing your enrollment period for 2017 could cost you an extra $51.60 ($4.30 X 12 months), and this figure is liable to increase with each successive year.
You'll also potentially owe Part B late penalties. Like the Part D penalties, they extend for the entire length of your enrollment in the Medicare program. Missing a full year could increase your Part B monthly premiums by 10%. In 2017, the standard premium for Part B is $134, which means you could face an additional penalty of $13.40 a month, or nearly $161 annually, when you do enroll (and that's assuming Part B premiums remain unchanged next year, which may not be the case).
There's even the potential that you could owe a 10% per month penalty on Part A if you haven't earned 40 lifetime work credits. The good news is most working Americans have, and therefore receive Part A free. But if you don't have enough lifetime work credits, you may have a third penalty to factor in as well for your tardiness.
You may qualify for a special enrollment period
If you miss Medicare's initial enrollment period you could be in a world of financial hurt. However, if you have a really good excuse, you may get a second chance. Under special circumstances you can make changes to your Medicare Advantage and Medicare prescription drug coverage outside of the normal enrollment periods.
These special circumstances include:
- You recently moved (e.g., you just moved back to the U.S. after living abroad or you moved to a new address that isn't in your plan's service area).
- You lose your current coverage (e.g., you're no longer eligible for Medicaid or you left coverage from an employer).
- You have a chance to get other coverage (e.g., you can be covered through an employer or you enrolled in a program of all-inclusive care for the elderly).
- Your plan changes its contract with Medicare.
- You lose state pharmaceutical assistance program eligibility.
- An error by a federal employee.
- You no longer have a special need but are enrolled in a Special Needs Plan.
There are a few other special circumstances, but you'll notice that "I forgot" is not among them. If you qualify for a special enrollment, consider yourself lucky. Otherwise, if you're an existing member of Medicare, remember that you have until Dec. 7 to select an original Medicare prescription drug plan (along with Part A and B if you're not automatically enrolled through Social Security), enroll in an alternative Medicare Advantage plan, or switch between the two. If you don't, be prepared to face the consequences.