The Scary Costs of Medicare

By Ryan Repko, CFP®

Medicare Open Enrollment begins on Thursday, October 15th, and continues through December 7th. In the spirit of Halloween, I want to cover some of the “scary” costs of Medicare because if you sign up too late, you could pay monthly penalties that continue throughout the rest of your life!

If you are already receiving Social Security benefits by the time you reach age 65, you are automatically enrolled in Medicare Parts A and B, which are hospital and outpatient coverage respectively. However, you must enroll in Part D for prescription drug coverage yourself. If you are not already receiving Social Security benefits by the time you reach age 65, you need to enroll in Medicare Parts A and B yourself, during your specific enrollment period.

If you delay signing up for Part B when you enroll with Medicare Part A without qualifying coverage, then you may have to pay a late enrollment penalty for the rest of your life. Your monthly Part B premium may go up 10% for each 12-month period that you could have had Part B, but didn’t. In 2026 delaying 12 months amounts to a total annual penalty of $243.60, which is adjusted each year and incurred for life!

Similar penalties exist if you delay signing up for Medicare Part D, which is for prescription drug coverage. The Part D penalty in 2026 is $56.40 annually if you delayed signing up for one year without qualifying coverage. The penalty is applied for life, and it is adjusted each year. 

It’s essential to review your Part D prescription coverage each year during Open Enrollment because prescription coverages change. Although Parts A & B can be considered “set it and forget it,” you should reevaluate your Part D plan each year, so you don’t overpay for your prescriptions.

If you’re still working at age 65, be aware of a Medicare trap for people who work for employers with fewer than 20 employees. You should enroll in Medicare Parts A and B when you first become eligible at age 65, because Medicare assumes the role of the primary insurer, even if you have healthcare coverage through your employer. If you don’t enroll, your company’s health care plan could refuse to cover you for services that Part B would have covered.

Medicare can be very complex, and it can be overwhelming when deciding which coverages to sign up for. The single most important thing to do is find out when you become eligible for benefits and sign up by the deadline. If you need help, seek out a financial advisor.

Ryan Repko is a CERTIFIED FINANCIAL PLANNER™ Professional at Ruedi Wealth Management in Champaign, Illinois.