Medicare Parts Explained

Not many Americans are aware of the penalties they may face if they forgo any Medicare Part. It is best to understand these penalties before making any decisions relating to Medicare/Medigap.

Medicare used to have just two parts: A and B. It was not until later that Part C was appended to allow people to get private all-in-one plans, instead of Part A and B. Congress later brought in Part D to deal with prescription drugs. Medicare Advantage offers some plans that bundle up with drug coverage.

Part A does not come with a premium, other than the payroll tax. Parts B,C, and D have additional premiums that must be paid. Those wanting to save money often think they can do that by waiting until later before they sign on the dotted line. It does not work that way. There is an additional penalty when someone does not sign up for Parts B,C, or D after becoming eligible, unless there is other insurance acceptable to Medicare.

The penalty for part B is 10 percent for every year the person did not enroll. The Part D penalty is related to the base premium for each year and rises for every month someone on Medicare does not have drug coverage. Part C higher premiums for delaying are related to the specific Medicare Advantage Plan.

Penalty exceptions are when someone has alternative coverage that is recognized by Medicare, for instance an employer or union insurance plan with medical and prescription coverage. Be aware that the rules governing this area may vary according to whether the Medicare enrollee is working or their spouse is employed. Additionally, those who decline to enroll in Medicare because they have coverage at work, may find that coverage limited by the company refusing to cover costs that Medicare would have funded.

Medicare rules are very complex and one misstep may cost a participant a lot of money. Always check what penalties may be faced before forgoing any of the Medicare Parts.

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