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What's the Part D late enrollment penalty?
The late enrollment penalty is an amount added to your Medicare Part D premium. You may owe a late enrollment penalty if, at any time after your initial enrollment period is over, there's a period of 63 or more days in a row when you don't have Part D or other Prescription drug coverage (for example, from an employer or union) that's expected to pay, on average, at least as much as Medicare's standard prescription drug coverage. People who have this kind of coverage when they become eligible for Medicare can generally keep that coverage without paying a penalty, if they decide to enroll in Medicare prescription drug coverage later. creditable prescription drug coverage.
If you get Extra Help, you don't pay the late enrollment penalty.
How much is the Part D penalty?
The cost of the late enrollment penalty depends on how long you went without creditable prescription drug coverage.
The late enrollment penalty is calculated by multiplying 1% of the "national base beneficiary premium" ($31.08 in 2012) times the number of full, uncovered months you were eligible but didn't join a Medicare Prescription Drug Plan and went without other creditable prescription drug coverage. The final amount is rounded to the nearest $.10 and added to your monthly premium.
The national base beneficiary premium may increase each year, so the penalty amount may also increase each year.
Your plan will tell you if you owe a penalty
After you join a Medicare drug plan, the plan will tell you if you owe a penalty, and what your premium will be. You may have to pay this penalty for as long as you have a Medicare drug plan. If you had to pay a Part D late enrollment penalty before you turned 65, the penalty will be waived once you reach 65.
Mrs. Smith didn't join when she was first eligible—by June 15, 2009. She doesn't have prescription drug coverage from any other source. She joined a Medicare drug plan with an effective date of January 1, 2012.
Since Mrs. Smith was without creditable prescription drug coverage from July 2009–December 2011, her penalty in 2011 was 30% (1% for each of the 32 months) of $31.08 (the national base beneficiary premium for 2012), which is $9.32. The monthly penalty is rounded to the nearest $.10. She pays this late enrollment penalty of $9.30 monthly in addition to her plan’s monthly premium.
Here's the math:
.30 (30% penalty) × $31.08 (2012 base beneficiary premium) = $9.32
$9.32 (rounded to the nearest $0.10) = $9.30
$9.30 = Mrs. Smith's monthly late enrollment penalty
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