Why Medicare should warn enrollees about steep late sign-up penalties

For many Americans entering retirement, it comes as an unwelcome surprise: Medicare premiums become much more expensive if you do not sign up on time.

The program tacks on a 10 percent penalty on monthly Part B premiums for each full 12-month period of late enrollment – and you keep on paying the penalties for the rest of your life. The aim is to avoid “adverse selection,” which occurs when people sign up for coverage only when they think they will need it. That helps keep premiums lower for all Medicare enrollees.

But a heads-up would be nice. And that is the intent of the Beneficiary Enrollment Notification and Eligibility Simplification Act (BENES Act), a bill introduced with bipartisan support last week in the U.S. Senate (companion legislation was introduced in the House of Representatives earlier). It would require the government to send a notification letter in the year before your 65th birthday – the first date of Medicare eligibility. The letter would explain the enrollment rules, and – importantly – how Medicare interacts with other insurance coverage you might have.

Roughly 750,000 Medicare beneficiaries paid late enrollment penalties in 2014, according to the Congressional Research Service (CRS). That is less than 2 percent of enrollees, but for those who do pay the penalties, the bite is painful. On average, total premiums for late enrollees were 29 percent higher, CRS reported.

How are Medicare late enrollment penalties calculated? Who pays them? Learn more at Reuters Money.

Comments

  1. K Brennan says:

    Why the hell does this link to Learn More take me to sonepkace completely unrelated to Reuters Money? What the hell are you trying to sell me now?

  2. Mark Miller says:

    Link is fixed now – mistake on my end.

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