Although enrollment in Part D is voluntary, you may be subject to a late enrollment penalty. If you do not have drug coverage that is at least as good as Medicare’s, you will pay a penalty if you do not enroll when you first become eligible for coverage, or within 63 days of losing your comparable coverage. This penalty is one percent of the “national base beneficiary premium” at the time you enroll for each month you have delayed enrollment, rounded to the nearest $.10. You will pay this amount every month you remain in the program. Delaying enrollment for a long time can be very costly.
Because the penalty is calculated at the time you enroll, and premiums are expected to keep rising to reflect inflation in drug costs, this penalty policy will result in a significant cost increase for Part D coverage over time. Although initially it is not a large amount, the penalty grows quickly.
Example: John was first eligible to enroll in Medicare Part D during the Initial Enrollment Period that began on October 15, 2017. Despite his eligibility for drug coverage, John did not enroll in Part D.
John waits until November 2018 to enroll for 2019 coverage (1 year)
- At enrollment, the national base beneficiary premium is $35.02
- His penalty added to each month’s premium is 1 percent of $35.02 x 12 months = $4.20
- His premium will be $39.22
John waits until November 2022 to enroll for 2023 coverage (5 years)
- At enrollment in 2022, at an estimated national base beneficiary premium of $46.17
- His penalty added to each month’s premium is 1 percent of $46.17 x 60 months = $27.70
- His premium will be $73.90 ($73.87 rounded to the nearest $.10)
John waits until November 2026 to enroll for 2027 coverage (9 years)
- At enrollment, at an estimated national base beneficiary premium of $56.90
- His penalty added to each month’s premium is 1 percent of $56.90 x 108 months = $61.45
- His premium payment has now more than doubled because of the penalty
- His premium will be $118.40 ($118.35 rounded to the nearest $.10)