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The Premium Penalty - The High Cost of Waiting

 If time is money, then "Procrastination" also has a price. It now seems that even doing nothing may have a high cost when it comes to the Medicare Part D program.

The first Medicare Part D Open Enrollment period began November 15, 2005 and ended May 15, 2006. For those missing the May 15 deadline, the total increase for 2006 was an automatic 7% (representing the delay from May to December 2006). This percentage is then multiplied by the average premium cost for Medicare Part D plans (in 2006, this value is around $32.50). Some have called this cost increase a "life-time premium penalty" because anyone who incurs the premium penalty must pay the penalty each month for a long as they are enrolled in a Medicare Part D plan.

How does the work? Well, if this year's average monthly premium for a Medicare Part D plans is $32.50 per month, a person who waited 7 months to enroll in a Medicare Part D plan would add an extra $2.25 per month to their monthly premium (calculated - 1.07 * $32.20 = $34.45 or an additional $27.00 per year). The premium "penalty" will stay in effect for the life of the Beneficiary's Medicare Part D plan and may even increase over time (although in 2007 the average value of a plan will be reduced to $27.35).

Please note, that these penalties or additional costs may not apply if you currently have drug coverage through a former employer or union considered by the Centers for Medicare and Medicaid Services (CMS) as "creditable coverage". Also, anyone who qualifies for the "Extra Help" program will not be charged a Late Enrollment Penalty.
Example for Plan Year 2025:

For plan year 2025, the Late Enrollment Premium Penalty is $0.37 for each month that you were not enrolled in a Medicare Part D plan, but were eligible for Medicare Part D.

For our example, let’s say you had Part D coverage starting when you were initially eligible through 2010 and then decided that you did not need coverage starting January 1, 2012 so you dropped your Medicare Part D coverage. Your situation changed at the end of 2012 and you chose to enroll in a Part D plan for 2013, your monthly premium penalty would be $4.41 or 12 x $0.37.

Your Part D plan premium would be the regular plan premium plus an additional $4.41 each month.


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