The average monthly 2017 Medicare Part D base premium used to calculate the late-enrollment penalty will increase to $35.63, a 4.5% increase over the 2016 base premium of $34.10.  (You might remember that the 2016 Medicare Part D base premium was a 3% increase over the 2015 base premium of $33.13.)

How is your late-enrollment penalty calculated?

The Medicare Part D late-enrollment premium penalty is an additional monthly cost paid by Medicare Part D beneficiaries who did not enroll in a Medicare Part D prescription drug plan when they were first eligible or who were without creditable prescription drug coverage for more than 63 days.

"Creditable" drug coverage is any prescription coverage that is at least as good as basic Medicare Part D prescription drug coverage, such as VA (Veterans Administration) drug coverage or employer drug coverage.

If you are subject to a late-enrollment penalty, you will pay your plan’s monthly Medicare Part D premium along with an additional penalty calculated as one percent (1%) of the annual national base Medicare Part D monthly premium for each month you were without creditable prescription drug coverage.  The penalty is permanent and you will pay the penalty (adjusted each year for the annual base Medicare Part D premium) as long as you have Medicare drug coverage.

An example of how to estimate your 2017 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 $21.38 (60 months without drug coverage * 1% of $35.63) or around an additional $257 per year for your drug coverage.  (Typically, the late-enrollment penalty is rounded to the nearest $0.10, so the actual monthly penalty would be $21.40.)

On a positive note: You are not responsible for calculating your own penalty.  Your actual late-enrollment penalty will be calculated by the Social Security Administration, reported to your Medicare Part D or Medicare Advantage plan, and then reported to you.

As reference, the annual base Medicare Part D premium is calculated on an annual basis and released by the Centers for Medicare and Medicaid Services (CMS).  Here are the average Medicare Part D base premium values from past years used to calculate  late-enrollment penalties:

2017: $35.63 2016: $34.10 2015: $33.13 2014: $32.42 2013: $31.17 2012: $31.08

2011: $32.34 2010: $31.94 2009: $30.36 2008: $27.93 2007: $27.35 2006: $32.20

How large of a late-enrollment penalty could someone pay in 2017?

About $543 per year.  It is possible that you could have a penalty that reaches as high as an additional $45.25 per month that must be paid in addition to your 2017 Medicare Part D or Medicare Advantage plan premium. Here are the assumptions we used for our calculations.

• You were eligible for Medicare back before January 2006 and
• You never joined a Medicare Part D plan until January 2017 and
• You are not eligible for the financial Extra Help program and
• You have been without any other creditable prescription drug coverage since the start of the Medicare Part D program (127 months) (we begin to count months starting with June 2006 through December 2016),

... So now you would have a monthly late-enrollment penalty of around $45.25 in 2017 – paid in addition to your monthly Medicare Part D plan premium.

Our math:  We calculated the maximum penalty as 127 months without drug coverage multiplied by 1% of $35.63 = $45.25.  In other words, if you were eligible for Medicare Part D coverage back in 2005 and first join a Medicare Part D plan (or Medicare Advantage plan that includes drug coverage or MAPD) in January 2017, you will pay an additional $543 penalty per year for your Medicare Part D drug coverage (and as you can imagine, this penalty can change every year as the Medicare Part D base premium changes).

(Again, the late-enrollment penalty is typically rounded to the nearest $0.10, so the actual monthly penalty would be $45.30 -- making the annual amount closer to $544.)

The ever-increasing "cost of waiting" to enroll in a Medicare Part D plan.

 

Our suggestion:  Even if you use no prescription medications, look at the monthly costs on this chart and consider enrolling in a Medicare Part D plan or Medicare Advantage plan with the lowest monthly premium.  Just think of Medicare Part D as "insurance" that is available should you need it.

The Annual Base Medicare Part D premiums vs. The Average Basic Medicare Part D premiums

As a reminder, the CMS estimated average basic Medicare Part D premium ($34 in 2017) is not used for purposes of calculating the late-enrollment penalty.   Instead, the CMS Part D base beneficiary premium (or national base monthly Medicare Part D premium) is used to determine the amount of your late-enrollment penalty.

Remember:  In certain situations, you can appeal your late-enrollment penalty.

Also, as noted above, no late-enrollment penalties are assessed on Medicare beneficiaries who qualify for the Medicare Part D financial Extra-Help or Low-Income Subsidy (LIS) program.

For more information, please take a look at our Late-Enrollment Penalty (LEP) FAQ section.

Click here if you would like to read more from CMS (2016 tip sheet) on the Medicare Part D late-enrollment penalty: https://Q1News.com/558.html