Part B, medical insurance, is a very important piece of Medicare. It helps cover outpatient services and preventive care. Despite its importance, it’s optional coverage because it has a monthly premium, $185 in 2025. And because it’s optional, there are many who have not enrolled. If anyone goes without Part B when they should have enrolled, they face a late enrollment penalty.
According to a Congressional Research Service study, an estimated 779,400 Medicare beneficiaries were paying the Part B penalty in 2021, about 10% more than who paid the penalty in 2017. It’s time to shed some light on this penalty.
The Penalty
- The late enrollment penalty kicks in when an eligible beneficiary goes a full 12 months without Part B.
- The penalty is 10% of the current Part B premium for every year late in enrolling. In 2025, that is $18.50.
- The penalty follows for life.
The average penalty for the almost 800,000 (noted above) is about 30%. That means they were three years late with Part B enrollment and are paying an additional $55.50 per month this year (on top of the monthly premium of $185).
Why Does This Happen
There are two main reasons people face a Part B penalty.
1. Failing to pay the Part B premium.
Medicare will cancel the coverage if premiums are not paid in full after 90 days. (Read more about this here.)
2. Not knowing when to enroll in Part B and missing their chance.
This is probably the driver of most penalty situations. The Part B late enrollment penalty was designed to encourage people to enroll in Medicare when first eligible in order to help maintain a balanced risk pool. But exactly when is a person first eligible to enroll? For many, this happens at age 65, during their Initial Enrollment Period. Only those who have a group health plan related to their current employment or that of a spouse at a company with 20 or more employees can delay enrollment without repercussions. That’s because these companies cannot change the rules. Upon retirement, these individuals can qualify for a Part B Special Enrollment Period to get Part B without delay or penalty. Those who have any other type of coverage at age 65 not based on current employment, such as a retiree or individual plan, must enroll in Part B or face the consequences. Anyone who has coverage through a small employer (fewer than 20 employees) should also enroll. By law, that plan becomes secondary to Medicare after age 65.
At-risk Individuals
These examples of former clients highlight situations that can end with penalties. The first three were eligible to enroll in Part B at age 65 because they were not employed. However, they did not realize that and skipped enrollment. Then something unforeseen happened and they needed Part B.
- Veterans: A client retired at age 60 and started receiving all his medical care at a VA center. Even if he enrolled in Part B, the center could not bill Medicare. So, he decided not to enroll and skip the monthly premium. At age 78, his wife died and he now has difficulty getting to the center 40 miles from his home. He would really like to see healthcare providers in his small town but can’t, not without Part B.
- Expatriates: A husband and wife moved to Europe in the late 1980s. At age 65, they opted not to do Part B because they didn’t plan on returning to the U.S. However, they began facing unexpected medical issues in their early 70s and decided to move back to the states to be closer to family. They will need Part B.
- Federal retirees: A woman retired from her position with the federal government. Because Federal Employee Health Benefits (FEHB) coverage will continue after age 65 and pay benefits in full, with or without Part B enrollment, she kept her health plan and did not enroll in Part B. However, in March, after being diagnosed with a rare medical condition, she wanted to see a specialist who was not in the plan’s network but did accept Medicare. She was out of luck.
The last example is a client who retired in December 2023 at age 68 and started 12 months of company-paid COBRA continuation coverage. Because it was the same coverage he had as an employee, he decided to delay Part B enrollment and missed his Part B Special Enrollment Period. In September 2024, he was diagnosed with cancer and the plan informed him it would not pay because he should have signed up for Part B. He was responsible for his treatment costs.
All these clients had to wait until the General Enrollment Period, January 1-March 31, to enroll in Part B. Until then, they faced medical bills and/or could not see providers of their choice, and everyone is paying a penalty.
As with most Medicare situations, an appeal may be possible, depending on the circumstances. The letter about the late enrollment penalty contains information about appealing. The process can be long and, at times, frustrating. Understand that forgetting or not realizing you should have enrolled will not support an appeal.
What To Do about this Problem
The number one fix is prevention.
- If not actively working with group health coverage at age 65, enroll in Part B during the Initial Enrollment Period.
- If working past age 65, pay attention to your Part B Special Enrollment Period. When retiring, give yourself enough time to work through the Medicare process.
If it is too late to prevent the problem, enroll during the next GEP and be sure to pay the penalty or Medicare could cancel Part B.
To avoid coverage and costs issues, it is very important to figure out when you are “first eligible” for Part B and what your situation requires you to do, well before turning 65. Procrastination can be costly.
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