Medicare Penalties: the 3 Big Ones

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The Real Facts About Medicare Penalties & Timing

Have you ever made a mistake that cost you more than you ever imagined? When it comes to Medicare, some mistakes don’t just sting—they haunt you for life in the form of never-ending penalties.

Over the years, I’ve met countless people who wish they had found me sooner, before they were locked into costly Medicare mistakes. The good news? You still have time to avoid these Medicare penalties—and I’m here to help!

Medicare Penalties medicare penalties

The Medicare Part B Late Enrollment Penalty

A Cautionary Tale: Walter’s Costly Mistake

Walter was a minister in hospice care, always putting others first. At 87 years old, he finally decided to retire and fully transition to Medicare. But there was one major problem—he had never enrolled in Medicare Part B because his employer’s insurance covered him. Now, he needed proof of continuous coverage dating back to age 65, but one of his former employers had gone out of business. No proof? No exceptions.

What’s the Damage?

Medicare slapped Walter with an 80% penalty on his monthly Part B premium—for life. That’s right, forever. And this penalty grows the longer you delay.

How to Avoid It

  • Enroll in Part B during your Initial Enrollment Period (IEP) (3 months before & after turning 65).

  • If still working, ensure employer coverage is creditable and sign up for Part B within 8 months of losing coverage.

  • You can defer enrolling in Medicare Part B indefinitely without penalty as long as you have employer health coverage that is as good as Medicare-credible coverage.

  • COBRA doesn’t count! Don’t wait until COBRA ends to enroll in Part B—it won’t extend your enrollment window!
  • Missed your window? You’re stuck waiting for General Enrollment (Jan 1–Mar 31), triggering late penalties.

The Medicare Part D Late Enrollment Penalty

The Price of Procrastination

I met a business owner in her late 70s, still sharp and thriving, who never saw the need for a Medicare Part D plan. “I don’t take any meds,” she told me—until suddenly, she did. When she finally needed Eliquis, the price shocked her. Then came another surprise—the Medicare Part D late enrollment penalty.

How It’s Calculated

Medicare adds 1% of the national base premium for every month you go without drug coverage after becoming eligible. It doesn’t seem like much at first, but over the years, it adds up. That penalty keeps growing for every month you do not have a Part D plan, and the penalty is permanent–for the rest of your life!

How to Avoid It?

  • Sign up for Part D when first eligible (even if you don’t take meds).

  • If you have other drug coverage, make sure it’s creditable (equal to or better than Medicare’s standard).

  • Don’t go more than 63 days without creditable drug coverage—or you’ll start accruing penalties

Medicare Part B late enrollment penalty

The Medicare Part A & HSA Contribution Penalty

Penalty is Sneaky

HSAs used to be an afterthought in Medicare discussions. Not anymore. Today, more people have High-Deductible Health Plans (HDHPs) with HSAs, and many are blindsided when they learn that Medicare enrollment kills HSA contributions.

How This Becomes a Costly Mistake

  • Once enrolled in Medicare Part A (OR Part B), you can no longer contribute to an HSA.
  • If you keep contributing, you’re hit with a 6% IRS excise tax every year the extra funds stay in your account.
  • You must also pay back any taxes saved along with the penalty.

  • Medicare Part A has a 6-month retroactive enrollment rule. In other words, your Part A is backdated 6 months or until you turned 65, whichever is shorter.

    So, if you contributed during any of that time, from the activation of Part A, you owe the penalty.

    Consequently, you must stop contributing to the HSA at least 6 months before activating Medicare.

Medicare HSA penalty

How to Avoid It

  • If you plan to enroll in Medicare at 65, stop contributing to your HSA at least 6 months prior.
  • If working past 65, delay taking Social Security to avoid automatic Medicare Part A enrollment.
  • If you accidentally contribute after Medicare enrollment, withdraw the excess before tax time to minimize damage.

Final Thoughts On Medicare Penalties

Medicare penalties are costly, permanent, and completely avoidable—if you plan ahead. The best way to protect yourself? Work with an expert who knows the ins and outs of Medicare enrollment!

If you’re approaching 65—or past it and feeling unsure—let’s talk! Don’t leave your future to chance.  📞 Call us today at 402-614-3389 and speak with a licensed insurance agent professional to ensure you avoid these costly Medicare mistakes. Let’s get it right the first time!

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