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Avoiding Medicare Penalties

Making a mistake with your Medicare enrollment can have lifelong consequences. There are several severe penalties to make sure you avoid when dealing with Medicare. Below we cover the most important ones and how to avoid them.

Part B – Late Enrollment Penalty (LEP)

If you do not have *creditable coverage* and are eligible to sign up for Medicare Part B but miss your enrollment window, you will be charged a 10% penalty on top of your Part B cost which will stay with you forever. That comes out to roughly $17 extra per month for each 12-month period you don’t sign up for Medicare Part B when you should have. Yikes!

How to avoid? Simple, sign up for your Part B during the 3 month window before your 65th birthday or as soon as you lose coverage through an employer plan.

Paying Extra Due To High Income (IRMAA)

If your income is above certain thresholds, the government will add on a “surcharge” to your monthly Part B and Part D premiums. In 2023, those limits are $97,000/yr as an individual and $194,000/yr filing jointly. Note: These income limits are based on your 2021 adjusted gross income. For folks in this situation, Part B can cost up to $560.50/mo and Part D can cost an extra $76.40/mo above your plan premium.

How to avoid? Our team can file an IRMAA appeal form for you to see if you qualify to get out of this surcharge. We see roughly 60% of appeals get approved, especially if your income will be going down as you enter retirement or if your income was unusually high due to a windfall payment of some sort (sale of property, inheritance, lump sum pension, etc).

Part D Drug Plan – Late Enrollment Penalty

Many of the healthier people we speak with may not be taking any medications at all and therefore, don’t want to pay for a Prescription Drug plan that they do not plan on using. However, if you do not enroll in a Part D drug plan and no not have any other *creditable* drug coverage, you will have a penalty added onto your drug plan once you do sign up for one. The penalty works out to roughly $3/mo for every 12-month period you don’t have a drug plan. So for example, if you wait until age 70 to get a drug plan….that is 5 years x $3/mo = $15/mo added on to your drug plan premium each month indefinitely.

How to avoid? If you don’t have other drug coverage, just get an inexpensive Part D Drug plan so that you avoid the penalty.

You can also eliminate an existing Part D penalty by qualifying for Medicare’s Low Income Subsidy program. 


When it comes to Medicare, the penalties are life-long which means that they will really add up over the course of your lifetime. Its best to simply avoid them and keep that money in your pocket.