People With Medicare

Is there a penalty if I haven’t enrolled yet?

In general, you will have to pay a penalty if you

  • Are considered eligible for Medicare Prescription Drug Coverage, and
  • Do not qualify for the Extra Help, and
  • Do not have drug coverage from another source that is as good as the Medicare drug coverage, and
  • Did not join a plan by May 15, 2006.

What does coverage “as good as” Medicare mean?

Current plans and programs that offer drug coverage are compared to the Medicare Prescription Drug Coverage. If they cover as much of the cost of your drugs as the basic Medicare drug benefit defined by the law, they are considered “as good as” what Medicare is offering. This means you have what is called “creditable coverage.” Your employer or union or your Medigap plan should let you know if your plan is creditable coverage, or as good as Medicare’s drug coverage.

Amount of penalty

The penalty is an increase in premium – it is 1% of the average premium nationwide ($32 in 2010) for each month you are without drug coverage that is as good as Medicare’s drug coverage. This penalty is permanent—you would have to pay it for as long as you have Medicare Prescription Drug Coverage. And the penalty changes each year.

EXAMPLE:

If you were eligible to join a plan when the coverage started on May 15, 2006, and you joined during the open enrollment period last fall – November 15 - December 31, 2009:

  • Your drug coverage starts January 1, 2010.
  • If you do not have other comparable drug coverage, you will have 43 months without comparable drug coverage (June – December 2006, plus all of 2007, 2008 and 2009). Your penalty will be 43% of the average premium nationwide ($32), added to your monthly premium – a total of $40.04 per month.
  • This additional amount will be added to your premium each month that you are enrolled in the Medicare Prescription Drug Coverage.

If you wait until November of 2010 to join

  • Your drug coverage starts January 2011. You will have waited 55 months (June 2006 to January 1, 2011).
  • Your penalty will be 55% of the average premium nationwide for 2011, to be announced in August 2010, added to your monthly premium.
  • This additional amount will be added to your premium for as long as you are enrolled in the Medicare Prescription Drug Coverage.

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