A Success Story: Reversal of Medicare Late Enrollment Penalties

by Apr 18, 2022Health Coverage & Insurance, Retirement Planning

Setting the Stage – Medicare Late Enrollment Penalties

Americans who don’t enroll in Medicare Part B when they are first eligible at age 65 typically face onerous late enrollment penalties (barring qualifying exceptions) which are applied for life. The Social Security Administration (SSA), which handles Medicare enrollment, is the agency that imposes these harsh Part B penalties.

While Part B late enrollment penalties are far more common than Part A penalties, it’s also possible for the latter to be imposed when you need to buy into Part A, as we’ll see below.

In its role as penalty enforcer, sometimes SSA gets it wrong, and applies penalties where there shouldn’t be any. SSA’s decisions can be appealed but getting them to reverse their decision can be a painstaking process with an uncertain outcome at best.

In a recent triumph, as part of our cross-border health care advisory practice at MCA Cross Border Advisors Inc., we successfully appealed SSA’s imposition of Medicare Part A and Part B late enrollment penalties for our client.

Our client, a US citizen by birth who lived in Canada her whole life and only moved to the US in her 80s, was hit with steep late enrollment penalties going back to age 65 following her Medicare application.  

We were very pleased with the successful outcome. It took two separate appeals, but in the end, our perseverance paid off, because an SSA administrative law judge agreed with us, overturned SSA’s original decision and reversed all penalties.

Qualifying for Medicare

Barring certain qualifying disabilities, Americans become eligible for Medicare at age 65. Apart from being age 65, you need to be: a) a US citizen; or b) a US green card holder who has lived continuously in the US for at least 5 years; or c) someone, or the spouse of someone, who has worked in the US for at least 10 years.

Only those with the 10 years of US work history (and their spouses) qualify for premium-free Part A Medicare having paid sufficient US payroll taxes through their wages. Those with no US work history must pay the full “uninsured” Part A premium ($499 USD per month in 2022). Those with at least 7 ½ years of US work history but less than 10 pay a reduced monthly Part A premium ($274 USD in 2022).

On the other hand, all Medicare beneficiaries, regardless of work history, must pay for Part B ($170.10 USD in 2022, though higher income beneficiaries pay extra), which is financed through monthly premiums and not through payroll taxes.

Medicare Late Enrollment Penalties

The Part B late enrollment penalty is calculated as 10% of the Part B monthly premium for every 12-month period that has elapsed during which an eligible individual could have enrolled in Part B but did not. Someone who delayed enrolling in Part B for 10 years would therefore face a doubled Part B premium (10 years x 10% = 100% penalty) when they finally enroll. As mentioned above, Part B late enrollment penalties are permanent.

Part A late enrollment penalties are less common given that most Americans enjoy premium-free Part A having worked for at least 10 years in the US – with no premium to pay, no penalty applies for late enrollment. Part A penalties only apply when someone must buy into Part A as we saw above. Part A penalties are also calculated as 10% of the Part A premium, but they are far less harsh than Part B penalties because: a) they aren’t multiplied by the number of years of forgone enrollment; and b) they only last for twice the number of years of delayed enrollment rather than being permanent.

Our Client’s Case

Our client fell into the category of a US citizen by birth who had never lived in the US as their primary residence, even though they spent a lot of time in the US over the years as a vacationing Canadian snowbird.

Under SSA rules, a US citizen living abroad who never accumulated the 10 years of US wages and who must therefore buy into Part A, can only do so when their primary residence is in the US. It doesn’t matter if they’ve maintained a US address as a snowbird, are on the electoral register, or have otherwise maintained connections to the US – only someone who resides permanently within the US can buy into Medicare.

Because our client never worked in the US, she wasn’t technically eligible for Medicare at age 65 when her primary address was in Canada. She only became eligible upon her recent move to the US in her 80s. 

As SSA employees tend to be unfamiliar with this rule, they hit her with both Part A and Part B penalties, which significantly added to her monthly Medicare cost.

Fortunately, we had the knowledge that in her specific case, the penalties should not have been imposed. We went to battle for her and were pleased with the positive outcome.

Knowing the rules and regulations is sometimes only half the battle.  In this case, we at MCA not only knew that an injustice had been committed, we had the means and wherewithal to get SSA to reverse its decision. While we can’t provide legal advice, we can help get you through administrative hurdles and ensure your financial interests are protected at every turn.

For any questions about obtaining US Medicare, please contact us to request a consultation.

Jonah Ravel

Jonah Ravel

Senior Cross Border Financial Planner

MCA Cross Border Advisors, Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.>