What is a Late Enrollment Penalty?
A late enrollment penalty is an amount added to your Medicare Part D monthly premium if you choose to wait to enroll. You may owe a late enrollment penalty if you go without a Medicare Prescription Drug Plan (Part D), or without a Medicare Advantage Plan (Part C) (like an HMO or PPO) or other Medicare health plan that offers Medicare prescription drug coverage, or without creditable prescription drug coverage for any continuous period of 63 days or more after your Initial Enrollment Period is over.
The cost of a late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage. Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($34.10 in 2016) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium. Note that the national base beneficiary premium may increase each year, so your penalty amount may also increase each year.
EXAMPLE:
Mrs. Martinez is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2012. She doesn’t have prescription drug coverage from any other source. She didn’t join by May 31, 2012, and instead joined during the Open Enrollment Period that ended December 7, 2014. Her drug coverage was effective January 1, 2015.
2015: Since Mrs. Martinez was without creditable prescription drug coverage from June 2012–December 2014, her penalty in 2015 was 31% (1% for each of the 31 months) of $33.13 (the national base beneficiary premium for 2015) or $10.27. Since the monthly penalty is always rounded to the nearest $0.10, she paid $10.30 each month in addition to her plan’s monthly premium in 2015.
0.31 (31% penalty) × $33.13 (2015 base beneficiary premium) = $10.27
$10.27 rounded to the nearest $0.10 = $10.30
$10.30 = Mrs. Martinez's monthly late enrollment penalty for 2015
2016: In 2016, Medicare recalculated Mrs. Martinez’s penalty using the 2016 base beneficiary premium ($34.10). So, Mrs. Martinez’s new monthly penalty in 2016 is 31% of $34.10 or $10.57 each month. Since the monthly penalty is always rounded to the nearest $0.10, she’ll pay $10.60 each month in addition to her plan’s monthly premium.
.31 (31% penalty) × $34.10 (2016 base beneficiary premium) = $10.57
$10.57 rounded to the nearest $0.10 = $10.60
$10.60 = Mrs. Martin's monthly late enrollment penalty for 2016
To avoid a late enrollment fee being added to your premium each month and potentially increasing each year:
1. Join a Medicare Prescription Drug Plan when you're first eligible.You won't have to pay a penalty, even if you've never had prescription drug coverage before.
2. Don't go 63 days or more in a row without a Medicare drug plan or other creditable drug coverage.Creditable prescription drug coverage could include drug coverage from a current or former employer or union, TRICARE, Indian Health Service, the Department of Veterans Affairs, or health insurance coverage. Your plan must tell you each year if your drug coverage is creditable coverage. They may send you this information in a letter, or draw your attention to it in a newsletter or other piece of correspondence. Keep this information because you may need it if you join a Medicare drug plan later.
3. Tell your plan about any drug coverage you had if they ask about it.When you join a Medicare drug plan, the plan will send you a letter if it believes you went 63 days or more in a row without other creditable drug coverage. The letter will include a form asking about any drug coverage you had. Complete the form and return it to your drug plan by the deadline in the letter. If you don't tell the plan about your creditable drug coverage, you may have to pay a penalty.
Information from Medicare.gov, Part D late enrollment penalty (2016) & 3 ways to avoid the late enrollment penalty (2016)
A late enrollment penalty is an amount added to your Medicare Part D monthly premium if you choose to wait to enroll. You may owe a late enrollment penalty if you go without a Medicare Prescription Drug Plan (Part D), or without a Medicare Advantage Plan (Part C) (like an HMO or PPO) or other Medicare health plan that offers Medicare prescription drug coverage, or without creditable prescription drug coverage for any continuous period of 63 days or more after your Initial Enrollment Period is over.
The cost of a late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage. Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($34.10 in 2016) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium. Note that the national base beneficiary premium may increase each year, so your penalty amount may also increase each year.
EXAMPLE:
Mrs. Martinez is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2012. She doesn’t have prescription drug coverage from any other source. She didn’t join by May 31, 2012, and instead joined during the Open Enrollment Period that ended December 7, 2014. Her drug coverage was effective January 1, 2015.
2015: Since Mrs. Martinez was without creditable prescription drug coverage from June 2012–December 2014, her penalty in 2015 was 31% (1% for each of the 31 months) of $33.13 (the national base beneficiary premium for 2015) or $10.27. Since the monthly penalty is always rounded to the nearest $0.10, she paid $10.30 each month in addition to her plan’s monthly premium in 2015.
0.31 (31% penalty) × $33.13 (2015 base beneficiary premium) = $10.27
$10.27 rounded to the nearest $0.10 = $10.30
$10.30 = Mrs. Martinez's monthly late enrollment penalty for 2015
2016: In 2016, Medicare recalculated Mrs. Martinez’s penalty using the 2016 base beneficiary premium ($34.10). So, Mrs. Martinez’s new monthly penalty in 2016 is 31% of $34.10 or $10.57 each month. Since the monthly penalty is always rounded to the nearest $0.10, she’ll pay $10.60 each month in addition to her plan’s monthly premium.
.31 (31% penalty) × $34.10 (2016 base beneficiary premium) = $10.57
$10.57 rounded to the nearest $0.10 = $10.60
$10.60 = Mrs. Martin's monthly late enrollment penalty for 2016
To avoid a late enrollment fee being added to your premium each month and potentially increasing each year:
1. Join a Medicare Prescription Drug Plan when you're first eligible.You won't have to pay a penalty, even if you've never had prescription drug coverage before.
2. Don't go 63 days or more in a row without a Medicare drug plan or other creditable drug coverage.Creditable prescription drug coverage could include drug coverage from a current or former employer or union, TRICARE, Indian Health Service, the Department of Veterans Affairs, or health insurance coverage. Your plan must tell you each year if your drug coverage is creditable coverage. They may send you this information in a letter, or draw your attention to it in a newsletter or other piece of correspondence. Keep this information because you may need it if you join a Medicare drug plan later.
3. Tell your plan about any drug coverage you had if they ask about it.When you join a Medicare drug plan, the plan will send you a letter if it believes you went 63 days or more in a row without other creditable drug coverage. The letter will include a form asking about any drug coverage you had. Complete the form and return it to your drug plan by the deadline in the letter. If you don't tell the plan about your creditable drug coverage, you may have to pay a penalty.
Information from Medicare.gov, Part D late enrollment penalty (2016) & 3 ways to avoid the late enrollment penalty (2016)