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How to avoid the Medicare Part B premium penalty

Medicare is a government-subsidized health insurance for many Colorado residents age 65 and over, and certain disabled individuals. However, there is a monthly premium for Medicare Part B for most seniors.

If one does not sign up for Medicare when first eligible, he or she may have to absorb a premium penalty later when signing up for Medicare. The Medicare Part B penalty is permanent and payable every month the individual has Part B coverage.

Premium penalty amount

The amount of the late penalty added to the premium for Medicare Part B is 10 percent of the standard premium amount for every 12-month period that the senior went without signing up for Part B. Thus, if the premium were currently $109, the penalty added if one full year was missed would be $10.90 for a total of $119.90. If the elder went without Medicare for two years, his premium would be an additional $21.80 on top of the $109.

The issue of the premium penalty is separate from the question of when an individual can sign up for Medicare and when the coverage will be effective. A discussion of enrollment periods and when one can and should sign up for Medicare follows this blog.

Creditable coverage

Under certain circumstances, despite not signing up for Medicare Part B, some individuals will not suffer the premium penalty. This reprieve applies to those who enjoyed creditable coverage from another appropriate health insurance plan. Typically, if a current employer of the senior or his or her spouse provides a group plan of health insurance, that plan will constitute creditable coverage.

It is important to remember that current employment allows the group health insurance coverage to be creditable for Medicare premium purposes. If the retired former worker's prior employer provides health insurance as a term of retirement, that coverage will generally not count as creditable coverage and any late sign up for Medicare will cause the premium penalty.

However, the current employment related health insurance coverage that will be creditable to the working spouse would also suffice for the non-working spouse if that plan covers the spouse.

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