Penalty for Joining Later

Is there a penalty if I haven’t enrolled yet?

In general, you will have to pay a penalty if you:

  • Are considered eligible for Medicare Prescription Drug Coverage, and
  • Do not qualify for the Extra Help, and
  • Do not have drug coverage from another source that is as good as the Medicare drug coverage, and
  • Did not join a plan by May 15, 2006.

What does coverage “as good as” Medicare mean?

Current plans and programs that offer drug coverage are compared to the Medicare Prescription Drug Coverage. If they cover as much of the cost of your drugs as the basic Medicare drug benefit defined by the law, they are considered “as good as” what Medicare is offering. This means you have what is called “creditable coverage.” Your employer or union or your Medigap plan should let you know if your plan is creditable coverage, or as good as Medicare’s drug coverage.

What is the amount of the penalty?

The penalty is an increase in premium – calculated as 1% of the base beneficiary premium ($31.17 in 2013) multiplied by the number of months you are without drug coverage that is as good as Medicare’s drug coverage. This penalty is permanent—you would have to pay it for as long as you have Medicare Prescription Drug Coverage. And the penalty changes each year. See example below on how the penalty is calculated.

EXAMPLE: Mr. Day was eligible to enroll in Part D as of May 2011. He chose not to enroll in a Part D plan at that time. He did not have creditable drug coverage. This past fall he joined during the annual Open Enrollment Period (October 15 – December 7, 2012):

  • His drug coverage starts January 2013.
  • He will have waited 19 months (June 2011 to January 1, 2013).
  • His penalty is calculated as 19% of the base beneficiary premium for 2013 ($31.17), which equals $5.92.
  • He will have a penalty amount of $5.90 ($5.92 rounded to the nearest ten cents) added to his monthly Part D premium in 2013.
  • This additional amount ($5.90) will be added to his Part D plan premium for as long as he is enrolled in Medicare prescription drug coverage. And, the penalty amount may go up each year.

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