Although the Medicare Part D prescription drug program is voluntary, if you drop your prescription drug plan coverage and do not have any other creditable prescription drug coverage (and are not qualified for the Medicare Part D Extra Help program), you will be subject to a late-enrollment premium penalty for each month that you are without coverage. For more information, please see: What is the Medicare Part D late enrollment penalty?
The penalty is calculated as an increase of 1% of the national base Medicare Part D premium for each month you are without coverage.
Here is an example of estimate a 2016 Medicare Part D late-enrollment penalty
If you were previously without creditable prescription drug coverage for
five years (60 months), you would pay, in addition to your monthly
Medicare plan premium, a monthly penalty of $20.50 (60 months without
drug coverage * 1% of $34.10) or an additional $246 per year.
How high of a 2016 late-enrollment penalty could someone pay?
About $471 per year.
It is possible that you could have a penalty that reaches as high as an additional $39
per month that must be paid in addition to your 2016 Medicare Part D or Medicare Advantage plan premium. So, if you:
- were eligible for Medicare back before January 2006 and
- never joined a Medicare Part D plan until 2016 and
- are not eligible for the Extra Help program and
- have been without any other creditable prescription drug coverage since the start of the Medicare Part D program (115 months),
you would now have a monthly late-enrollment penalty for of around $39
in 2016 – paid in addition to your monthly Medicare Part D plan premium.
We calculated the maximum penalty as 115 months without drug coverage *
1% of $34.10 = $39 rounded to nearest 1$). In other words, you will
now pay an additional $471
penalty per year for your Medicare Part D coverage.
The average national base monthly premium used to calculate the penalty will probably increase a little each year, so your penalty will also continue to increase over the life of your Medicare Part D plans.