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Ask Ms. Medicare

Paying for the Part D Late Penalty

Q. I was eligible for Part D drug coverage when it began in 2006 but didn’t sign up then. Now I want to join the program for 2009 but I’ve been told I must pay a late penalty.  How much will this be?

A. The Part D late penalty is calculated by multiplying the number of months you’ve been without drug coverage by one percent of the national average premium (NAP), which is the average of all Part D plans nationwide in any given year.

When the Part D program began in 2006, people already in Medicare could sign up until May 15 of that year without incurring a late penalty. As you could have enrolled then, but didn’t, you’ve now been without drug coverage for 31 months (June 2006 through December 2008).  The NAP for 2009 is $30, and one percent of this amount is 30 cents. So your late penalty in 2009 is calculated as 31 x 30 cents = $9.30. This will be added to the monthly premium of whichever Part D plan you enroll in for 2009.

The penalty is added to your premiums for as long as you stay in the Part D program—and it’s possible that you may pay higher penalties in future years. That’s because each year your late penalty will be recalculated. The number of months you’ve been without coverage (31 in your case) remains constant. But if the NAP goes up, so does the one percent multiplier. For example, if the NAP in 2010 rises to $32, your monthly late penalty would be 31 x 32 cents = $9.62. As Medicare rounds the amount to the nearest 10 cents, the actual penalty in this case would be $9.60. Similarly, if the NAP goes down to $28, the penalty would also reduce: 31 x 28 cents = $8.68, rounded to $8.70.

The late penalty applies only to people who have missed their personal deadline for signing up for Part D.  That deadline varies according to circumstances. The deadline may be when you first join Medicare and have no other “creditable” drug coverage—that is, coverage Medicare regards as at least as good as Part D. Or it may be when you lose creditable coverage, for example when an employer’s plan terminates. Or it may be when you return to the United States after living abroad or are released from prison. In all these circumstances, you get a special enrollment period to sign up with a Part D plan without penalty. Click here for more detailed information on how to avoid a late penalty.

Here are some more examples of late penalties for 2009, according to the number of months without creditable drug coverage:

Deadline for joining Part D without penalty

Date Part D coverage begins

Months without coverage

Late penalty calculation

for 2009

Monthly penalty paid in 2009*

December 2008

January 2009

0 months

Not applicable

$0

March 2008

January 2009

9 months

9 x 30 cents

$2.70

August 2007

January 2009

16 months

16 x 30 cents

$4.80

November 2006

January 2009

25 months

25 x 30 cents

$7.50

May 2006

January 2009

31 months

31 x 30 cents

$9.30

* Rounded to the nearest 10 cents, according to Medicare regulations

Anyone who misses their deadline for enrolling in Part D can sign up only during the annual open enrollment period that runs from November 15 through December 31 each year. If you miss this window, you must wait until open enrollment the following year, which means another year without drug coverage and 12 more months added to the late penalty calculation.

If you receive Extra Help: You will not face a late penalty if you qualify for Extra Help, the program within Part D that provides low-cost drug coverage to people whose income and savings are below a certain level.

Patricia Barry is a senior editor at the AARP Bulletin.

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