Ask Ms. Medicare: How Much Will I Pay for the Part D Late Penalty?

Q. I was eligible for Part D drug coverage when it began in 2006 but didn’t sign up then. Now I want to join the program for 2009, but I’ve been told I must pay a late penalty. How much will this be?

A. The Part D late penalty is calculated by multiplying the number of months you’ve been without drug coverage by 1 percent of the national average premium (NAP), which is the average of all Part D plans nationwide in any given year.

When the Part D program began in 2006, people already in Medicare could sign up until May 15 of that year without incurring a late penalty. Because you could have enrolled then, but didn’t, you’ve now been without drug coverage for 31 months (June 2006 through December 2008). The NAP for 2009 is $30, and 1 percent of this amount is 30 cents. So your late penalty in 2009 is calculated as 31 x 30 cents = $9.30. This will be added to the monthly premium of whichever Part D plan you enroll in for 2009.

The penalty is added to your premiums for as long as you stay in the Part D program—and it’s possible that you may pay higher penalties in future years. That’s because your late penalty will be recalculated each year. The number of months you’ve been without coverage (31 in your case) remains constant. But if the NAP goes up, so does the 1 percent multiplier. For example, if the NAP in 2010 rises to $32, your monthly late penalty would be 31 x 32 cents = $9.62. As Medicare rounds the amount to the nearest 10 cents, the actual penalty in this case would be $9.60. Similarly, if the NAP goes down to $28, the penalty would also be reduced: 31 x 28 cents = $8.68, rounded to $8.70.

The late penalty applies only to people who have missed their personal deadline for signing up for Part D. That deadline varies according to circumstances. Your deadline may be when you first join Medicare and have no other “creditable” drug coverage—that is, coverage that Medicare regards as at least as good as Part D. Or it may be when you lose creditable coverage, for example when an employer’s plan terminates. Or it may be when you return to the United States after living abroad or are released from prison. In all those circumstances, you get a special enrollment period to sign up with a Part D plan without penalty. (See more detailed information on how to avoid a late penalty.)

Here are some more examples of late penalties for 2009, according to the number of months without creditable drug coverage:

* Rounded to the nearest 10 cents, according to Medicare regulations

Those who miss their deadline for enrolling in Part D can sign up only during the annual open enrollment period that runs from Nov. 15 through Dec. 31 each year. If you miss this window, you must wait until open enrollment the following year, which means another year without drug coverage and 12 more months added to the late penalty calculation.

If you receive Extra Help: You will not face a late penalty if you qualify for Extra Help, the program within Part D that provides low-cost drug coverage to people whose income and savings are below a certain level.

Patricia Barry is a senior editor at the AARP Bulletin.