Don't Risk It! Avoid Medicare Late Penalties

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This show does not offer investment products or investment advice. Oh, we have a somber topic to talk about today on Finishing Well, Medicare penalties. Oh, my. Yeah, you see? It's terrifying. It's terrifying.

Bob Newhart would tell you to stop it, you know, and I would too because, you know, Jesus had a word for you. In fact, in 1 John, one of my favorite verses actually in the Bible, in 1 John 4.18, it says, perfect love drives out fear because fear has to do with punishment. And when you think about punishment, it's like a penalty, like, oh, my goodness, Medicare has penalties? Well, again, perfect love drives out fear because fear has to do with penalties. And then one of the penalties that obviously gets driven out if you're a Christian and the perfect love drove out of me, Hans was the fear of death itself, which is the ultimate punishment. The ultimate penalty, they take you off the field. You're out of the game. But in Christianity, right?

Nothing could be better. I mean, most fear that we experience, it's all the same. People say, now, is this a bad fear? Is this a crippling fear? No, no, it's just fear.

About the same as every other fear I've had my whole life. And I'm going to sit here and deny it. I'm going to say, hey, it's no big deal. We have people, they call us up, boy, watch your videos, listen to you on the radio. You're the people we want to buy the Medicare insurance from and get the Medicare consulting.

And so let's go. And then we start talking to them and explaining Medicare part A and part B. And they won't let us, it's about those penalties.

I don't want any of those penalties. And I can just hear it in their voice. It shouldn't everybody, but a number of people they've read just enough. They've read the word penalty and they're terrified. Yeah. And but the good news is that the truth will set you free. Right. And so what we want their penalties, they're real.

And death is real as well. But you know, the truth will set you free. And we're hoping that by listening today, we're going to set you free of those fear of penalties. Realizing there is, you know, I love what you said earlier, actually, in preparing for the show, or as you say, you know, 99 percent of our clients are good, law abiding, want to live by the rule, you know, people. And if you do that, you have nothing to fear in this system at all. You don't.

And so let's go. Why do they have penalties in the first place? Are they trying to punish you for not understanding this stuff and making the wrong decision?

No. What they're trying to do is influence people's behavior, especially the healthiest people, because there's people that just skip all this stuff and they just don't sign up for Medicare. They don't sign up for any of it when they're supposed to. And usually those people are pretty healthy.

People that have a lot of illnesses, they're at the front of the line. I mean, six months before they turn 65 and they're all ears and they're signing up because they know they need this stuff. Well, see, the government wants those people to sign up and they know those people are going to sign up and they're going to start claiming right away. But they want everybody that's supposed to sign up, 100 percent of them, a census, they want you when you turn 65 to sign up for Medicare Part B. And if you don't, they're going to penalize you when you want it later.

And they really want you to know how these things work. Now, there's some exceptions to the penalty. And the biggest one is that you don't need Medicare because you got group insurance at work. So the Medicare would also like, boy, if you can stay in your group insurance and let them pay your medical bills for a while into retirement, we'd rather have that than have you sign up for Medicare and we have to pay your medical bills. So the government's just fine with you not signing up for Medicare Part B if you've got group insurance or your spouse has group insurance. And you're going to basically say, oh, I'm all covered.

I'm just going to stay here and blah, blah, blah, blah, blah. Well, they're later going to give you an exception to the penalty. Just about anybody else, if you don't sign up when you're 65 for Part B and you don't sign up for Part D at 65, which is the drug plans, those two things, and start paying the premium that you're supposed to pay for that, and then you later want it, they're actually going to make you pay two penalties. One penalty is in the form of money. You're going to pay a monetary amount, and once those penalties, monetary penalties start, they last for life. I mean, so once you're assessed a penalty, you're still going to be paying that at 95, even if you were assessed it at 70 every month. But the second type is they're not going to let you get on it right away when you want to get.

I was just giving you the example. Like Robbie turned 65 last October, and he's been on Medicare now about seven, eight, nine months. So he did the right thing. He signed up for Part B and Part D. But let's pretend he didn't. And he's through the open enrollment period. He's got no Medicare Part B. And all of a sudden, he gets sick here in July.

You say, man, boy, I made a mistake. I want Medicare. How much is my penalty going to be? And I say, well, the monetary penalty is the least of the problems you got because you can't even tell them you want to sign up until January next year. So you're going to have to wait six months until January to March. That's the enrollment period for people that didn't sign up that now want to sign up for B. Then the coverage, once they approve you, doesn't start until July of the next year. So if you made this decision even this close to it, the dollar penalty or the monetary penalty is small.

It's the year you got to wait when you really wanted it, and now you can't have it. Also, there's one other little tidbit that I want to throw in there and not to confuse things, but just to give people the reason why you probably want to listen so that you can understand these things is really believe that it's information that you need to know is that even if you have the group coverage, it has to be right and you don't sign up for Medicare and you say, well, I've got group coverage. I'm good. If that has to be creditable, creditable, it's not credible. It's creditable. That's some standard that Medicare came up with that they're going to evaluate your group insurance and they're going to say, yeah, he gets a free beyond the penalty because his group insurance is credited to both. And you want to get into something complex. So if you're anywhere near the line, you need to go ahead and sign up for Part B.

But those are the things that people can come for us. We can look at your group insurance and in about 15 minutes, we can tell you whether it's credited to both or not and whether you're going to fall under one of these exceptions. And if you don't, you just sign up for Medicare Part B.

Right. But you actually had a case where people had the insurance and the penalties. A lot of times these are wealthy people. It's my experience that wealthy people, they just kind of sleep through some of these enrollment periods. And you know why they do that? It's because they can't.

I mean, they're just because they're wealthy. And so they keep their group insurance, the people at the office pay it and the business they still own. And they're just kind of above it all until years later and they get sick. And then they have to apply for Social Security because they're 70 and now you have to apply at 70.

And that's this example. These people are very well-to-do and they're very tidy in need of, because I do some help with their money as well. So I'm into all of their business. But with Medicare, they just skipped it. And so then I said, what have you been doing for health insurance? Well, they got this individual coverage paid for through the business that they just kind of thrown together several years ago.

It's not creditable coverage. So now we had to get them on Medicare Part A, Part B, late. We had to go through all these waiting periods.

Boy, were they hot. And by then this individual coverage was costing them each over $1,000 a month, but they were paying it out of their business. They were just kind of asleep at the wheel I was dealing with. So they had to pay that whole time until Medicare Part B would start. Then they had a delay in Medicare Part D, and then they got this big penalty assessed. And the penalty, each year you skip, your Part B premium goes up by 10%, and that's for life. So these people had skipped six years, so she had a 60% increase in her Part B premium. He had skipped like nine years, because he was 74 at the time. So he had a 90% increase or has a 90% increase in his Part B premium. He's paying that until he leaves this earth, that dollar penalty.

And for those of us who don't have a lot of money, that's a big bunch. Let me tell you something, these people are hot about that. We filed appeals. Now that they understand what went on, they don't take any responsibility. They're mad at somebody else who's kind of unnamed, who didn't do whatever they were supposed to do and inform them, and they're just really upset about that penalty. And there is nothing they can do about it. And talking to me about it in an angry way is not a good move either, because I just tell them straight up, here it is.

Yeah, and so it's kind of important for all of us to know that, wow, when you turn 65, and you know somebody turning 65, this is something that has to be attended to. It isn't like, well, don't worry, you've got coverage. Well, is your coverage creditable? Is what you have going to work?

And how do you make absolutely sure? Because again, my Medicare premiums are 400 and some odd dollars every quarter. And you can imagine that times two would be 800 and some odd dollars. It's a lot of money. Well, it's a lot of money. And here's the thing I'm going to tell you, even if you're past 65 and you didn't sign up, and you're now all of a sudden, we got you worried about a new thing, that's what we do is we add worries to a lot of people through the show and when we meet with them.

That's not what we're trying to do. But so what if you're 68 and you're still working, and you're probably saying, man, I'm listening to this show on Saturday morning. And now this guy tells me that my coverage needed to be creditable.

And I don't know, is it? Look, the government doesn't have the creditable police. So most of the time, we could just check a box that says you had health insurance, or we can take a form to your employer and have them sign off that, yeah, you had the coverage. And they're also, so what I'm just saying is it's pretty easy to, you know, we're not misrepresenting ourselves or telling a lie. We're just filling out the forms and sending them into the government and signing you up for part B late and trying to get out of the penalty.

And it usually works. Okay. We're just checking boxes while we're doing this. So Medicare penalties today, I'm finishing well, and we do want to finish without penalty. Oh, yeah, it's brought to you by Cardinal guide, Cardinal guide.com. And cons is book, the complete Cardinal guide to planning for and living in retirement. So when we come back, more that we think you need to know when it comes to the Medicare penalties, Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans expertise and qualified charitable contributions, veterans aid and attendance, IRAs, social security, Medicare and longterm care. Just go to Cardinal guide.com and contact Tom to schedule a live recording of finishing well at your church Sunday school, Christian or civic group contact Hans at Cardinal guide.com.

That's Cardinal guide.com. Welcome back to finishing well as certified financial planner Han child today show Medicare penalty sounds like sign of a bummer. But actually, you know, I think once you understand what's going on, then you can certainly not have to deal with them. And I have the huge benefits of having Medicare. So here's the good news. Most people that are on Medicare don't pay any penalties, because they just do things right. Right.

Okay. And then some of the people that would pay penalties, we can help them navigate and perhaps get the government to remove the penalty or not charge them in the first place, when it's a judgment call. So part of our job, as I view it, in teaching the people that are listening to us about all of these subjects, is really just talking about the facts of the situation. And unfortunately, so many people that do what I do, that's all they talk about. I mean, they just drone on, if you go onto YouTube, and you look at some of the people, other people talking about the same things I have, you just go through this, it's kind of boring.

And I think that people just tune it out. But if I have a fault, I probably skip over the details too much. And that's part of making what you're giving you the details and putting some context around this as part of what is going to make people less concerned about them, which is what I want to do. So with Medicare, you got four parts of Medicare. You got part A, which is your hospital. You got part B, which is your medical or doctor's and outpatient. You got part C, which is really not a completely separate part. It is taking your A and B, and then turning it into a part C, which means that you're going to outsource your insurance, your Medicare.

You're going to take it away from government delivery system to having an individual insurance company doing it. So part C is really a combination of part A and part B, and you're receiving your benefits from an insurance company. And then you got part D, which is the drugs. And that's just, I think by coincidence, I think by coincidence that D is drugs because it's the fourth part of Medicare. So there are no penalties assessed on part A and part C. The only penalties that exist are on part B and part D, the medical and the drugs. And of course, they have to be different.

They're close, but they're different. So the part B penalty is you pay an extra premium of 10% for every year that you didn't have coverage that you should have. Like in the example we gave earlier, if you had to wait a year, you'd pay a penalty for that year too to actually get it. So if you were five years without it, and then you got it, and you were assessed the penalty, you'd pay 50% more than you otherwise would have been paying, and you're going to pay that for the rest of your life. They're lifetime penalties.

Then on part D, the drug plan, if you fail to enroll in a drug plan when you were supposed to, which is at 65, or when your group coverage ended, and it was creditable coverage, you're going to pay 1% penalty for every month you didn't have it that you should have. So that's really 12% a year. I'm sure there's a government committee of bureaucrats that sat in arguing about this. Somebody must have been voting, why don't we at least make it the same so that people could understand that.

But it's just a little bit different. It's 1% a month, and it's stacking. It's not compounded, which would be 12% a year. So if you went five years with no part D, then wanted it, got it, you would pay 60% extra, and you would pay that for life.

Right. And it also, apparently, from what I understand, works if you cancel your part D. So you had part D, and you went, well, I'm sick of paying this. We have people to do that. And for every month that you let that lapse, ka-ching, 1% more when you go to sign up again, right?

For every month you let it happen. You're going to think, boy, if there's any wealthy people listening out there saying, man, I'm never going to call Hans, because I'm telling you, it's the wealthy people that do that. They're not sick of paying it. They're just sick of the whole system.

So they think that's the way they're going to get it. I'm checking out. I have a lot.

I mean, these people pop into my mind. This guy is a good friend of mine. And he was in the insurance business forever, so he really thinks he understands this stuff. And he had just had it. This part D had made him so upset that he just called the insurance company and canceled it. He thought, I'll just get it somewhere else.

Well, there is no somewhere else other than the government, because the insurance company is acting on behalf of them. And we had to get him back on. And he's paying a little bitty penalty, because he was only off it for like two months, because the open enrollment was coming around. And so he's got this little bitty penalty tacked on. He didn't even notice it.

He's forgotten about it. But we have some people paying really big penalties on the part D. They just never enrolled in the system. They said, nobody told me to do that. I wasn't taking any drugs.

Well, OK. But you are now, and you wanted to get it. And the government wanted you, the person taking no drugs, to pay into the system in case you needed them in the future.

So those things, you know, that's part of what you've got to realize is that not only, and I would suppose it works the same way with part B, if you were to quit making the payments on that, or whatever the situation may be, do they do the same thing? Again, I mean, rich people just come up onto the thing. I shouldn't be so hard on rich people, because a number of them are just my best clients. And even these people I'm talking about, I have a lot of very wealthy clients. And I shouldn't be talking bad about them. But they do a lot of things, because they can, because they've got a lot of money. And you know, the consequences to this are not so severe to them.

And then they got me. And I kind of get them out of it, or get it fixed, or do whatever. But this is something you just really don't want to mess around with. You just want to get signed up for B, and get signed up for D, and just send them. They can take both of these premiums out of your Social Security check, if you're getting a Social Security check. And in these cases, a lot of these people, they don't want to do that. They want to pay bank drive. But I would recommend just to make sure this doesn't get lapsed, you know, when you're 85 or something, and you just forget to open the envelope, or do something with the bank. Have them deducted from your Social Security check.

Get signed up on time, and then, you know, just you can go ahead and call me up and complain about that. But at least we know the premiums paid to the government. Yeah, and the good news is, they just changed it. If you're like me, and I don't have Social Security yet, right? And so I'm paying for my Medicare. And it used to be you had to pay quarterly, whether you liked it or not. And it was not, you had to send it in. And now they got a deal.

They just started it. And I'm one of their newest ones, where they're literally taken out of your checking account every month, just for one month, you know, just boom, like, there you go. And I don't have to concern myself with penalties, or missing the payment, or anything like that. Well, the lady that I am thinking about with the Part D penalties, she's been on and off twice, okay?

And I didn't know this till you told me this, that you can now pay your Part B and Part D premium monthly, instead of quarterly, when you're paying the government directly. That was her. And boy was she hot about it. And of course, she just didn't send it in. And then once you don't send it in, now you're getting these bills, you're in arrears, and she didn't send them either. And she went a long time without drug coverage.

And then it took us trouble to get them back in, and they assessed the penalty. Then she did it again. And it was all over those quarterly premiums. And so my brother has it now set up for her. It's coming out of her Social Security check. But that took some doing, too, to get her to agree to that. And what's coming out of there is the regular premium plus two penalties.

They just count up the months, and however many they count up to, that's your penalty. You're turning 65. Here's an opportunity. Or you know someone who's turning 65, right? I have a couple friends. I was like, wow, so what are you going to do about Medicare? Oh, I ain't going to worry about it. I'm like, dude, you need to worry about it. No, I'm not going to mess with that. I don't need that.

I'm healthy. Oh, oh, oh, yeah, you need to mess with it. This isn't something that you just let slide because, you know, there are these penalties. And it's amazing to me. There isn't some big news flash that comes out and says, hey, when you turn 65, this is a critical situation.

You need to do this. Now, if you're collecting a Social Security check under 65, which now we're limiting some people, I mean, it's a smaller group. But if you're getting a Social Security check, they will just mail you a Medicare card and sign you up for part A and part B because they're assuming A, you're retired, and that B, you need insurance. And so they're going to sign you up for A and B.

They don't say to you a word about D. I mean, they're just thinking you're going to figure out you need D as well. And they also don't say a word to you about you need supplemental coverage. This Medicare all by itself is not enough.

You need to take a look at a Medicare supplement and get a part D plan. And that's really a big part of our business is serving people that are turning 65. We do it all over the country. And there's no, you know, that there it happens. And you can see that, like, wow, one month later, you're part D, you already got a penalty and you barely breathe.

It's coming at you. And so how do they do that? But don't they give you like a six month grace period or something on Medicare on the part B? To sign up?

Right. You need to sign up within seven months of the month. Well, it's three months before the month of and three months after. So there's a period where you can not sign up 90 days.

Yeah, it's more like 90 days. Yeah. Because that's right. I don't even have that stuff memorized because I'm just telling don't do it. I mean, you know, stop it. And we do get some people that call us, you know, where they turn 65 back in May. And so then I'm going to go read up on it, or I'm going to go out to Tom. Tom has all this stuff in his head.

He could just, if he's sitting right here, he could tell us exactly. But because we've gone in on the 29th of the month where we got, you know, one more day to get people signed up. And then we're going to go in because we've got to go into the Medicare website or we're going to call them and we'll be on hold forever and sign up. But, you know, we'll do that for people if they're nice. People call us up all angry about that. I'm always wondering about that, you know, where people are all mad at the system and then they're turning on us and then, but we still help those people too.

We pray for them. Yeah, because the scary part is, let's say, you know, it is 90 days and I think you're right because we could go three months before and three months after. So you go five months into this, right? You turn 65 in October and you wake up in March and go, man, I should have done something. Then boom, you've got number one, you got to wait a year. Well, actually in March, you could still get away with a application that would start in July. But if you change your story around a little bit, and it was April, now you'd have to wait more than a year because you'd have to wait from April to January to even apply. And then you'd apply in January and it would be July 1st when it starts.

So, you know, if we just move that little story one month, it would be like a 15 month waiting period. So there's a little bit of luck of the draw of this, which is our bad luck of the draw. So don't do it. Don't do it.

That's the word. Well, don't risk it is a better way to put it. Don't risk it. Then again, you can go to cardinalguide.com. You can email Hans, you got questions. Well, here's my dates.

Here's my situation. You can see that's really what he's there for. And his book, The Complete Cardinal Guide to Planning for and Living Retirement, all there at cardinalguide.com. If you didn't get to hear all this show, go back and listen to the podcast, like it, share it, all that stuff. And thank you again, Tom. Thank you.

And this is Hans this time, not Tom. Finishing Well is a general discussion and education of the issues facing retirees. Cardinalguide.com, Cardinal Advisors, and Hans Shile, CFP, sell insurance.

This show does not offer investment products or investment advice. We hope you enjoyed Finishing Well, brought to you by cardinalguide.com. Visit cardinalguide.com for free downloads of this show or previous shows on topics such as social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Hans' bestselling book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to cardinalguide.com. If you have a question, comment, or suggestion for future shows, click on The Finishing Well Radio Show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com.