Do I Really Need Prescription Drug Coverage Now?
If you don’t take any medications right now, or need them only occasionally, you’re likely wondering if it’s worth signing up. After all, you’d have to pay the premiums even if you didn’t need any prescriptions.
But you also need to think about the future. Like any insurance, drug coverage gives you protection against high drug costs if and when you need it. Here are some facts to consider. On average, someone age 75-79 will spend 25% more on drugs than someone 65-69. Also, almost one in five people with Medicare is projected to incur $5,000 or more in drug costs during 2006.
Can I wait and sign up for Medicare drug coverage later when I need it?
You can. Medicare drug coverage is voluntary, so you can sign up if you like or not at all. But there may be a financial penalty if you want to enroll later than the time when you were first eligible.
With some exceptions, the penalty for signing up late is a higher premium—an extra 1% of the national average premium for each month (or 12% for each year) that you delay. The longer you wait to join up, the higher your premium will be. For example, if you delay eight years, you’ll pay nearly double for the same coverage. The penalty adds up quickly, and you will have to pay it for as long as you have Medicare drug coverage.
If you are already on Medicare, the time to sign up without incurring a penalty is between November 15, 2005 and May 15, 2006. After this, most people won’t get another chance until the next enrollment period at the end of 2006. (People not yet on Medicare will be able to join a drug plan whenever they become eligible for Medicare.)
What if you don’t sign up for Medicare drug coverage now because you already have coverage from an employer or some other source? If you someday lose that coverage, you won’t have to pay a late penalty to join Medicare’s program—provided that the coverage you lost was at least as good as Medicare’s.
An example of how the late penalty works
Jill is already in Medicare and eligible to join a Medicare prescription drug plan in May 2006, but she doesn’t. In November 2008, she decides to sign up for coverage beginning in 2009. She is 31 months late in enrolling, which means she has to pay the late penalty. Here’s what happens:
- By 2009, the average national premium has risen to (let’s say) $46 a month. Jill’s late enrollment penalty is computed at 1% x 31 months x $46 which comes to $14.26 a month.
- So Jill must pay $14.26 in addition to the plan’s premium. In 2009, her monthly premium is $60.26 instead of $46.
- As the average premium rises in future years, so does the late penalty. In 2010, the average premium is (say) $49, so Jill’s late penalty will be 1% x 31 months x $49 which comes to $15.19. Her total premium would be $64.19 ($15.19 + $49).
