When you think of Medicare penalties, the late enrollment penalties for Part B and Part D may come to mind, but did you know there’s even a Medicare Part A penalty?
When discussing Medicare penalties, most people immediately think about the late enrollment penalties associated with Medicare Part B and Part D. However, there’s another penalty that often flies under the radar: the Medicare Part A penalty. While this penalty doesn’t affect most beneficiaries, understanding how it works and who it impacts can save you from unexpected costs in your retirement years.
What is the Medicare Part A Penalty?
Medicare Part A, often referred to as hospital insurance, covers inpatient hospital stays, care in skilled nursing facilities, hospice care, and some home healthcare services. For most Americans, Medicare Part A comes without a monthly premium because they’ve contributed to it throughout their working years through payroll taxes.
The Medicare Part A penalty applies specifically to those who haven’t paid Medicare taxes for at least 40 quarters (equivalent to ten years) during their working lifetime. If you fall into this category and don’t enroll in Medicare Part A when you’re first eligible, you may face a penalty that increases your monthly premium by 10% for twice the number of years you delayed enrollment.
Who Qualifies for Premium-Free Part A?
Before diving deeper into the penalty, it’s important to understand who receives Medicare Part A without paying a monthly premium:
- Individuals who have worked and paid Medicare taxes for at least 40 quarters (ten years)
- People who are eligible for Social Security or Railroad Retirement Board benefits
- Those whose spouse (current, deceased, or in some cases, ex-spouse) has worked and paid Medicare taxes for at least 40 quarters
If you meet any of these criteria, you’ll receive Medicare Part A without monthly premiums, regardless of when you enroll. This means the Medicare Part A penalty won’t apply to you.
Who Will Be Penalized for Part A?
The penalty primarily affects two groups:
- People with fewer than 40 quarters of Medicare-covered employment: If you haven’t worked and paid Medicare taxes for the full 40 quarters, you’ll need to pay a monthly premium for Part A. How much you’ll pay depends on how many quarters you’ve accumulated.
- Those who delay enrollment: If you’re required to pay a premium for Part A and don’t sign up during your initial enrollment period, you may face an additional late enrollment penalty.
Understanding the Cost: Part A Premiums in 2026?
For 2025, the monthly premium structure for Medicare Part A is as follows:
| Quarters with Payroll Taxes | Monthly Part A Premium (2026) |
|---|---|
| 40 or more quarters | $0 (Free) |
| 30–39 quarters | $285 per month |
| Fewer than 30 quarters | $518 per month |
The Late Enrollment Penalty Calculation
If you don’t sign up for Part A when you’re first eligible and you don’t qualify for premium-free Part A, your monthly premium may increase by 10%. This higher premium continues for twice the number of years you could have had Part A but didn’t sign up.
For example:
- If you were eligible for Part A for one year but didn’t sign up, you’ll pay the higher premium for two years.
- If you delayed for two years, you’ll pay the higher premium for four years.
- If you delayed for three years, you’ll pay the higher premium for six years.
This penalty is calculated based on your monthly premium amount. For instance, if your base premium is $505 per month and you have a 10% penalty, you’ll pay an additional $50.50 per month, bringing your total to $555.50 per month.
Critical Enrollment Periods for Medicare
Understanding the various enrollment periods is crucial to avoiding penalties:
Initial Enrollment Period
Your initial enrollment period spans seven months: the three months before the month you turn 65, your birth month, and the three months after. For those who qualify for Medicare due to disability, the initial enrollment period works differently and is tied to when you begin receiving disability benefits.
Special Enrollment Period
If you’re still working at age 65 and covered by employer group health insurance (either through your employer or your spouse’s employer), you may qualify for a special enrollment period. This allows you to delay enrollment in Medicare without penalty. The special enrollment period typically lasts for eight months following the end of your employment or the end of your employer coverage, whichever comes first.
Late Enrollment Period
The late enrollment period refers to any time you sign up for Medicare after your initial enrollment period has ended and when you don’t qualify for a special enrollment period. Enrolling during this time may result in penalties, including the Medicare Part A penalty for those who don’t qualify for premium-free Part A.
Strategies to Avoid the Medicare Part A Penalty
If you’re concerned about facing the Part A penalty, here are two effective strategies to consider:
1. Draw Benefits from a Spouse or Ex-Spouse
If you haven’t worked enough quarters to qualify for premium-free Part A, you might be able to qualify through your spouse’s work record. The requirements are:
- Your spouse must be at least 62 years old
- Your spouse must have accumulated 40 quarters of Medicare-covered employment
- You must have been married for at least one year
For ex-spouses, you can draw from their work record if:
- You were married for at least 10 years
- You haven’t remarried before the age of 60
- Your ex-spouse is at least 62 years old and has accumulated 40 quarters
2. Accumulate More Work Credits
If you’re short on quarters, consider returning to work to reach the 40-quarter threshold. The minimum amount of earnings to receive one quarter of coverage (one work credit) in 2026 is $1,890. You can earn up to four credits in a single year, even if you make all the required income in less than a year.
For example, if you need four more quarters to reach 40, you would need to earn at least $7,560 in Medicare-taxed income (4 × $1,890). You could earn this amount in one month if your income is high enough, but it would still count as four quarters for the year.
Medicare Coverage Considerations While Working
If you or your spouse are still employed and covered by employer group health insurance, you have options regarding Medicare enrollment at age 65:
Medicare Part A While Working
Many people choose to enroll in Medicare Part A once they turn 65, even if they’re still working and have employer coverage. Since most people qualify for premium-free Part A, there’s often no financial downside to signing up. However, there are two important considerations:
1. Health Savings Account (HSA) Contributions
If you’re enrolled in Medicare (any part, including Part A), you can no longer contribute to a Health Savings Account (HSA). If you’re still working and want to continue making HSA contributions, you may want to delay Medicare enrollment altogether.
2. Medicare Advantage Trial Rights
When you first enroll in Medicare, you have a 12-month trial period for Medicare Advantage plans. During this period, you can switch to a Medicare Supplement (Medigap) plan without medical underwriting.
This 12-month clock starts ticking when you enroll in Part A, even if you’re still working. If you’re planning to use a Medicare Advantage plan when you fully retire, you might want to delay Part A enrollment to preserve these trial rights.
Other Medicare Late Enrollment Penalties to Be Aware Of
While this article focuses on the Medicare Part A penalty, it’s worth noting that there are other Medicare-related penalties:
Part B Late Enrollment Penalty
If you don’t sign up for Part B when you’re first eligible, you may face a penalty of 10% for each 12-month period you could have had Part B but didn’t. Unlike the Part A penalty, this penalty continues for as long as you have Part B.
Part D Late Enrollment Penalty
If you go without creditable prescription drug coverage for 63 days or more after your Initial Enrollment Period ends, you may face a Medicare Part D late enrollment penalty. The Medicare late enrollment penalty for Part D is calculated based on the national base beneficiary premium and the number of full months you went without creditable prescription drug coverage.
Making Informed Decisions About Medicare Enrollment
When deciding when to enroll in Medicare Parts A and B, consider:
- Your current health insurance coverage
- Whether you or your spouse are still working
- Whether your employer has more than 20 employees (which determines if your employer plan pays primary to Medicare)
- Your HSA contribution status
- Your future plans for Medicare Advantage or Medicare Supplement plans
Understanding the Medicare Part A penalty is crucial for financial planning, especially if you haven’t accumulated 40 quarters of Medicare-covered employment. By knowing the rules surrounding this penalty and planning accordingly, you can potentially save thousands of dollars in unnecessary premium costs during your retirement years.
Remember, most Americans will never face this penalty because they qualify for premium-free Part A. However, for those who don’t, strategic planning can help mitigate or eliminate these extra costs.
Learn About Medicare Part A and Beyond with Medicare School
Now that you’ve learned about the Medicare Part A penalty, its costs, and how you can ultimately avoid it, you may still need a little help deciding if and when you should enroll in Medicare Part A. If you need another voice to walk you through your options and the pitfalls associated with each choice, look no further than Medicare School. Schedule an appointment with one of our Medicare guides or give us a call to receive additional assistance.
Looking to learn more about Medicare Part A and B? Sign up for our free, virtual Medicare workshop.
Medicare Part A Penalty FAQs
Who has to pay the Medicare Part A penalty?
Only individuals who don’t qualify for premium-free Part A (those with fewer than 40 quarters of Medicare tax payments) and who don’t enroll during their initial enrollment period face this penalty.
How much is the Medicare Part A penalty?
The penalty is 10% of your monthly premium for twice the number of years you could have had Part A but didn’t sign up. This additional amount is added to your monthly Part A premium.
Can I avoid the Medicare Part A penalty if I’m still working?
Yes, if you’re covered by an employer group health plan (yours or your spouse’s), you qualify for a special enrollment period and can delay Medicare enrollment without penalty.
How does creditable prescription drug coverage affect Medicare penalties?
While creditable prescription drug coverage doesn’t directly affect the Medicare Part A penalty, it does prevent the Part D late enrollment penalty, which applies if you go 63+ days without prescription drug coverage after your initial enrollment period.
If I missed my initial enrollment period, when can I sign up for Medicare Part A?
You can sign up during the General Enrollment Period (January 1 to March 31 each year), with coverage starting July 1. However, if you qualify for a special enrollment period due to losing employer coverage, you can enroll any time during your eight-month special enrollment period without waiting for the General Enrollment Period.