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When to Apply for Medicare: Late-Enrollment Penalties

You'll probably want to enroll in Medicare when you first become eligible -- for example, when you're approaching your 65th birthday. In some cases, delaying enrollment can subject you to a penalty. Read more about eligibility for Medicare.

Medicare Part A late-enrollment penalty

Many beneficiaries are automatically eligible for premium-free Medicare Part A coverage; for example, those who have worked or spouses have worked at least 10 years, or 40 quarters, and paid Medicare taxes through their employment.

If you're not eligible for premium-free Medicare Part A, you will need to sign up for it when you first become eligible to do so. If you don't enroll when you're first eligible for Medicare, you can be subject to a late-enrollment penalty, which is added to the Medicare Part A premium. The penalty is 10% of your monthly premium, and it applies regardless of the length of the delay. You have to pay this higher premium for twice the number of years you could have had Medicare Part A but didn't sign up for it. For example, if you waited for a year to enroll in Part A, you could pay the 10% penalty for two years.

Beneficiaries with special circumstances may be able to enroll in Medicare Part A during a Special Enrollment Period (SEP) without a penalty. See details below.

Medicare Part B late-enrollment penalty

As mentioned above, many beneficiaries are automatically enrolled in Original Medicare, both Part A and Part B. If you're not automatically enrolled in Medicare Part B, and you don't enroll when you're first eligible for Medicare, you can be subject to a late-enrollment penalty, which is added to the Part B premium. You may have to pay the late-enrollment penalty for as long as you have Medicare Part B. The penalty amount could go up 10% for every 12-month period when you were eligible for Part B but didn't enroll. For example, if you waited for three years to sign up, your penalty could be 30% of the premium. In this example, you might pay your Part B monthly premium, plus 30%, for as long as you have Part B.

Even if you enroll in Medicare Part B (or are automatically enrolled), you could still face this penalty if you decide to drop Medicare Part B and sign up again at a later date.

Special Enrollment Periods (SEPs) for Medicare Part A and Part B

Some beneficiaries qualify for Special Enrollment Periods (SEPs), in certain situations. If you qualify for an SEP, you can enroll in Medicare Part A or Part B during your SEP without having to pay a late-enrollment penalty. For example, if you're covered by a group health plan because you or your spouse (or a family member if you're disabled) is working, your SEP for Medicare Part A or Part B is either of the following:

  • Anytime you're still covered by the group plan.

  • During the eight months starting the month after employment ends or the group plan coverage ends, whichever happens first. For example, if your employment ends on March 15 and your group coverage continues until March 30, you have until November 15 to enroll in Medicare Part A and Part B.

If you qualify for an SEP, usually the late-enrollment penalty won't apply to you.

Medicare Prescription Drug Plan late-enrollment penalty

If you don't enroll in a Medicare Prescription Drug Plan (Medicare Part D or a Medicare Advantage plan that includes prescription drug coverage, called a Medicare Advantage Prescription Drug plan) during the Initial Enrollment Period (IEP) for Part D, you may have to pay a late-enrollment penalty if you enroll in a Part D plan later. You won't have to pay this penalty if you:

  • Enroll in the prescription drug plan when you're first eligible to do so, during the IEP for Part D.

  • Make sure you have creditable coverage with your insurance plan. Your plan must tell you every year if your prescription drug coverage is creditable coverage. If you have a period of 63 or more days in a row without creditable coverage, you could pay a late-enrollment penalty.

  • Qualify for Medicare Extra Help.

  • Never enroll in a Medicare Prescription Drug Plan or a Medicare Advantage Prescription Drug plan.

The late-enrollment penalty for Medicare Prescription Drug Plans depends on how long you go without creditable coverage. The late-enrollment penalty is calculated by multiplying 1% of the "national base beneficiary premium" by the number of months you were eligible, but did not apply, for a Medicare Prescription Drug Plan. This amount is rounded to the nearest 10 cents and added to your monthly prescription drug plan premium. The national base beneficiary premium may change each year, so the late-enrollment penalty may also change each year. Beneficiaries may have to pay the late-enrollment penalty the whole time they're enrolled in a Medicare Prescription Drug Plan.

Do you have questions? You can talk to an eHealth licensed insurance agent -- our contact information is below.

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