8 Sneaky Medicare Penalties That Can Cost You Big (And How to Avoid Them)

You work hard, save what you can for retirement, and then hit 65, only to find out that one missed deadline can increase your Medicare premiums for the rest of your life.

This isn't obvious when you're first signing up for Medicare. But these penalties can easily cost you significant money and potentially derail your retirement plan.

If you know the rules ahead of time, you can avoid wasting your retirement savings on sneaky Medicare penalties.

Part A late enrollment penalty

Most people pay $0 for Medicare Part A because they or a spouse paid Medicare taxes for at least 10 years. But if you don't have enough work credits, you may have to buy Part A and pay a monthly premium instead. In 2026, that's $311 or $565, depending on how many work credits you have.

If you fall into this group and delay signing up, your Part A premium goes up by 10% for twice the number of years you went without coverage. If you or your spouse doesn't have enough work credits for free Part A coverage, plan for this during the initial enrollment period, which starts three months before the month you turn 65 and ends three months after.

Part B late enrollment penalty

Part B covers things like doctor visits, outpatient care, lab tests, and equipment. In 2026, the standard monthly premium is $202.90 per month.

But if you sign up late and don't qualify for a special enrollment, that premium can jump and stay higher for life. You'll pay an extra 10% for every full year that you could've had Part B but didn't, for as long as you have Part B.

The key to protection is "credible coverage" from current work. If you're 65+ and covered by an employer health plan from a company with 20 or more employees, you can usually delay Part B without penalty and then enroll during a special enrollment period after your job-based coverage ends.

Part D late enrollment penalty

Medicare Part D helps cover prescription drugs. You don't have to take a Part D plan at 65. But going without drug coverage or not having a creditable plan can trigger a penalty of around 1% of the national base premium per month that you don't have coverage.

With the 2026 base premium being $38.99 in 2026, if you went 20 months without coverage, your penalty would be an increase of 20%, or roughly $7.80 extra per month for life.

To avoid triggering this penalty, either enroll in Part D when you first qualify or make sure any other drug coverage you have is considered creditable.

HSA contribution penalties once you're on Medicare

Health savings accounts (HSAs) have tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. But once you enroll in Medicare Part A or B, your HSA contribution limit drops to zero, even if you still have a high-deductible health plan through work.

Any contributions after Medicare enrollment count as excess contributions and are subject to a 6% excise tax every year until you withdraw them. You may also suffer an extra 10% tax and back taxes if you sign up for Medicare during the HSA testing period, which is usually one full year from when you sign up for your HSA.

Other ways you could end up paying more for Medicare

Not every extra Medicare cost is labeled a penalty, but some mistakes can end up feeling like one. For example, if you miss your initial enrollment period and don't qualify for a special enrollment period, you may have to wait for the general enrollment period.

In that case, your coverage may not start until later in the year. That can leave you paying full price for care in the meantime, only to owe late-enrollment penalties on top.

Income-related monthly adjustment amounts (IRMAA)

If your income is higher, Medicare charges more for both Part B and D through income-related monthly adjustment amounts (IRMAA). In 2026, the first IRMAA tier starts for single filers earning more than $109,000 and joint filers earning over $218,000.

For the first tier, you'll pay an extra $81.20 per month for Part B and $14.50 for Part D, or roughly $1,150 per year per person. At the highest tier, you could pay around $6,936 in extra premiums per person per year.

Some retirees avoid or minimize IRMAA by spreading large IRA withdrawals across several years, using Roth accounts, or making qualified charitable distributions from IRAs. You may also get IRMAA reduced or removed if your income has dropped sharply due to a significant life change, such as retirement, widowhood, or divorce.

Losing your Medigap guaranteed-issue rights

Medigap (also called Medicare Supplement insurance) helps pay Original Medicare's deductibles, copays, and more. For many people who want the freedom to see almost any doctor that takes Medicare, Medigap is what makes that possible.

You get a six-month Medigap open enrollment period that starts when you're 65 or older and enrolled in Part B. During that time, insurers can't deny you a policy, charge you more because of your health, or make you wait for coverage of pre-existing conditions. After that window, in most states, insurers are allowed to use medical underwriting, review your medical history, charge higher premiums, or even refuse you coverage.

Ignoring who pays coverage first

Many people keep employer coverage, Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage, or a retiree plan after 65 and assume it will keep paying their medical bills. But Medicare usually pays first when an employer has fewer than 20 employees. And, once you're eligible for Medicare, many COBRA and retiree plans also expect Medicare to pay first.

If you don't enroll in Part A and B when you should, your plan can deny claims or claw back past payments, and you can face big bills plus permanent late penalties. When Medicare is supposed to be the primary, plan to enroll in Part A and B on time, even if you keep your other coverage.

Bottom line

Most Medicare penalties are the result of missing deadlines, skipping coverage, or not understanding how income and HSAs interact with the rules. The problem is that once they hit, they're often impossible to reverse.

You can avoid wasting money on Medicare penalties by knowing your enrollment dates, income level, HSA contributions, and Medigap timing. If you're unsure, it's worth getting advice from a professional.

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