The average monthly 2018 Medicare Part D base premium used to calculate the late-enrollment penalty will decrease
, a 1.71% decrease from the 2017 base premium of $35.63.
You may remember that the 2017 Medicare Part D base premium was a 4.5% increase
over the 2016 base premium of $34.10.
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. Some examples of creditable drug coverage include the VA (Veterans Administration) drug coverage, TRICARE, or employer/union 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 2018 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 $21.01
(60 months without drug coverage * 1% of $35.02) or around an additional $253
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 $21.00.)
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:
How large of a late-enrollment penalty could someone pay in 2018?
- 2018: $35.02
- 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
About $584 per year.
It is possible that you could have a late-enrollment penalty reaching as high as an additional $48.70
per month that must be paid in addition to your 2018 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 2018 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 (139 months) (we begin to count months starting with June 2006 through December 2017),
... So now you would have a monthly
late-enrollment penalty of around $48.70
in 2018 – paid in addition to your monthly Medicare Part D plan premium.
We calculated the maximum penalty as 139 months
without drug coverage multiplied by 1% of $35.02 = $48.68. 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, 2018, you will pay an additional $584
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).
The late-enrollment penalty is typically rounded to the nearest $0.10, so the actual "maximum" monthly penalty would be $48.70 -- making the annual amount closer to $584.40.
The ever-increasing "cost of waiting" to enroll in a Medicare Part D plan.
To enroll - or not to enroll when you are first eligible for Medicare Part D plan coverage . . .
We use the "maximum penalty" chart to emphasize the possible costs you may incur if you do not have any other drug coverage and delay enrollment your Medicare Part D plan. Aside from the penalty, if you decide to postpone Medicare Part D enrollment and then find that you have prescription needs, you may need to wait
until the annual Open Enrollment Period (starting October 15th and continuing through December 7th) to join a plan with coverage starting the next January 1st - and you will need to pay all of your prescription costs out-of-pocket until your Part D plan coverage starts.
Even if you currently use no prescription medications and are in good health, 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 (perhaps a Medicare Advantage plan that offers prescription drug coverage or MAPD with a $0 premium). And then consider your Medicare Part D plan as typical "insurance" that is available should you need it.
How does the annual base Medicare Part D premium compare to the average basic Medicare Part D premium?
Each year the Centers for Medicare and Medicaid Services (CMS) calculates an estimated average basic Medicare Part D premium ($33.50 in 2018
) based on the proposed Medicare Part D (PDP) and Medicare Advantage plan (MAPD) plan premiums submitted by plan providers (such as Aetna or Humana). However, this estimated average "basic" Part D premium is not
used for purposes of calculating the late-enrollment penalty. Instead, the CMS Part D "base" premium (or national base monthly Medicare Part D premium) is used to determine the amount of your late-enrollment penalty.
Comparing the estimated average "basic" Medicare Part D premium with the annual "base" Medicare Part D premium
As a reminder:
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://q1medicare.com/q1group/MedicareAdvantagePartD/Blog.php?blog_id=558