Medicare Part B Late Enrollment Penalty: What It Is, How Much It Costs, and How to Avoid It

The Medicare Part B late enrollment penalty is a permanent premium surcharge added to your monthly Part B premium when you did not sign up for Part B during your Initial Enrollment Period (IEP) and did not have a qualifying exception. The penalty is 10 percent of the standard Part B premium for each full 12-month period you were eligible for Part B but did not enroll.

The penalty is permanent. It does not go away after a certain number of years. If you pay a 20 percent penalty today, you will pay that same 20 percent surcharge on top of the Part B premium for the rest of your life — even as the base premium increases over time.

The legal basis is 42 U.S.C. § 1395r(b), which directs CMS to increase the Part B premium for late enrollees. CMS applies the penalty when you eventually enroll in Part B after your IEP has closed without a qualifying Special Enrollment Period.

The most important exception to the Part B late enrollment penalty is active employer coverage. If you or your spouse are actively working and covered by a group health plan through that active employment, you can delay Part B enrollment without penalty. When that active employment ends — or when the employer coverage ends — you have an 8-month Special Enrollment Period (SEP) to enroll in Part B without a late penalty.

The word 'active' is critical. Retiree health coverage does not qualify for this exception. COBRA continuation coverage does not qualify for this exception. Coverage through a former employer's retiree plan does not qualify. The coverage must be based on current, active employment — either your own or your spouse's.

The 8-month SEP begins the month after the active employment ends or the group health plan coverage ends, whichever comes first. Do not wait until COBRA runs out to enroll in Part B — COBRA is not creditable coverage for SEP purposes, and waiting will trigger the penalty.

Important: You do not need to wait for COBRA to end. The SEP clock starts when active employment ends. If you take COBRA after leaving your job, your 8-month SEP is already running. Enrolling in Part B during your COBRA period is allowed and avoids the penalty.

Veterans with VA health care benefits are not automatically exempt from the Part B late enrollment penalty. VA coverage is not considered creditable coverage for Medicare Part B purposes. Veterans who rely solely on VA benefits and delay Part B enrollment may face a penalty when they eventually need Part B — for example, if they need care outside the VA system or move away from a VA facility.

TRICARE for Life (TFL) requires Medicare Part B enrollment. Active-duty military retirees who have TRICARE must enroll in Part B when they become eligible for Medicare or they will lose their TRICARE coverage. There is no penalty exception for TRICARE retirees who delay Part B.

Medicaid and Medicare Savings Programs do not eliminate the Part B penalty, but if you qualify for a Medicare Savings Program, the state may pay your Part B premium — including any penalty surcharge — on your behalf. Eligibility is income- and asset-based and varies by state.

If you were not enrolled in Medicare Part A, you may not have been eligible for Part B, and the penalty clock may not have started. However, most people are automatically enrolled in premium-free Part A at 65 if they have sufficient work history. If you were not enrolled in Part A, your situation requires individual review.