Penalties For Not Signing Up For Medicare Part D: What Is the Part D Penalty?
Medicare Part D, or your prescription drug coverage, isn’t mandatory to have, but if you choose not to sign up for Part D, you’ll face a penalty.
In all honesty, the Part D penalty is slightly confusing. There is some math involved, and it does require you to focus for a minute in order to understand how it’s calculated.
But that’s what we’re here for at Sams/Hockaday – we’ll break it down so that the Medicare Part D penalty is easier to understand.
By the end of this article, you’ll also be able to calculate your own Part D penalty (if applicable).
What Is the Part D Penalty?
Medicare Part D is a health insurance plan that helps pay for your prescription drugs.
Medicare wants everyone to have prescription drug coverage in some form, and if you don’t, you’re penalized in the form of a fee.
If you’re still on your employer’s health plan, and it has drug coverage, you don’t need Part D.
You are only vulnerable to the Medicare Part D penalty when you’re over 65 and do not have any other form of prescription drug coverage.
The Part D penalty is a fee that continues to go up over time; however, you will not receive a bill in the mail for refusing drug coverage. The penalty comes in the form of an added fee when you finally sign up for Part D drug coverage.
This just means that the longer you go without Part D drug coverage, the more expensive your drug coverage will be later on.
How Is the Medicare Part D Penalty Calculated?
The Medicare Part D penalty is calculated using two different factors:
- How long you’ve gone without creditable drug coverage
- The national base beneficiary premium for that year
For each month that you don’t have creditable drug coverage, you’re penalized 1% of that national base beneficiary premium, and the final sum is added to your monthly Part D premium.
The national base beneficiary premium is the beneficiary premium percentage + the national average monthly bid amount. You don’t need to understand this, though – for our purposes, all you need to know is that the national base beneficiary premium is $35.02 for 2018. This number can increase or decrease each year depending on how drug prices fluctuate.
So, if we used this year’s national base beneficiary premium of $35.02 as our example, you’d be penalized 35 cents for 1 month of no drug coverage. That means that your Part D drug plan would cost an extra 35 cents per month for the rest of your life.
In another example, let’s say you didn’t have drug coverage for 2 years. That’s 24 months, which means you’d be penalized 24% of the national beneficiary premium that year. In 2018, that would equal a total of $8.40 ($35.02 x .24 = $8.40). This means that you’d pay an extra $8.40 per month (in addition to your regular Part D monthly premium) for the rest of your life.
How Do I Calculate How Much My Part D Late Enrollment Penalty Is?
If you’re looking for a Part D penalty calculator, all you need to do is fill in the blanks to this equation:
The national base beneficiary premium for the current year x the number of months you haven’t had drug coverage, and put a decimal in front of it = the monthly penalty added to your Part D drug plan
Here are a few examples to help you understand how to plug in your own numbers.
It’s currently June of 2018. You haven’t had creditable drug coverage since December of 2016. That means you haven’t had drug coverage for a total of 18 months.
It’s 2018, and the national base beneficiary premium is $35.02.
So, here’s your Part D penalty calculation:
$35.02 x .18 = $6.30
Here’s another example.
It’s currently September of 2018. You forgot to sign up for a Part D plan in May, so it’s been 4 months since you’ve had creditable drug coverage.
Here’s your Part D penalty calculation:
$35.02 x .04 = $1.40
One more example just to make sure you’re golden!
It’s currently August of 2018. You decided not to get Medicare Part when you turned 65, which was in February of 2009. That means you haven’t had Part D drug coverage for 114 months.
Here’s your Part D penalty calculation
$35.02 x 1.14 = $39.92
In all of these examples, your final calculation should be rounded to the nearest 10 cents. This is the fee you’ll have to pay in addition to your regular Part D premium each month. This fee does not go away for the life of the policy.
So, if you end up choosing a Part D drug plan that costs $40 per month, and we’re using the final example, your monthly bill would actually be $40 + $39.90, or $79.90.
How Can I Tell If I Owe a Part D Penalty?
If you’re not sure whether you had creditable drug coverage, you might not know whether you actually will owe a Part D penalty.
However, when you do sign up for a Part D plan, that plan will tell you if you owe a penalty. You will know what your total monthly premium will be.
How Do I Avoid the Medicare Part D Penalty?
Avoiding the Part D penalty is pretty simple: don’t go without drug coverage.
Here are some tips to make sure you don’t get stuck with that Part D penalty for the rest of your life:
- Join a Part D plan when you’re first eligible. For most people, this is when they turn 65. However, your agent – or one of our experts here at Sams/Hockaday – can confirm that for you.
- Don’t go over 60 days without a drug plan – this could Part D or some other type of creditable drug plan (through your employer, for example).
Do you need help with your Part D plan?
For starters, feel free to contact us so that we can help you compare your options, calculate your pentalty, and make the entire experience less daunting.
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