Did you know that there is a Penalty for NOT enrolling in a Part D Prescription Drug Plan when you were first eligible? Well, there is. If you do not have other Credible Drug Coverage when you enroll in Parts A and B of Medicare, and if you do not enroll in a Part D Prescription Drug Plan, then a penalty will be assessed at the time you DO need to enroll in a Part D Prescription Drug Plan. The penalty is assessed WHEN YOU HAVE TO ENROLL IN a Part D Prescription Drug Plan at a later time.
So, Here is something to think about – If you NEVER enroll in a Part D Prescription Drug Plan, Is there EVER a penalty?
NO, because the penalty is only assessed when you finally DO enroll in a Part D Prescription Drug Plan.
• What is the Penalty?
Medicare calculates the penalty by multiplying 1% of the “National Base Beneficiary Premium” ($32.74 in 2020) times the number of months you did not have a Part D drug plan.
Well, what is the National Base Beneficiary Premium?
There are 44 drug plans available. If we added up the premiums to ALL 44 plans, then divided that number by 44, the answer to that math mess is called the National Average Premium (NAP)
In 2020 the NAP is $32.74. Now, I did not say that your plan will cost $32.74. It’s just the average of all plans. So lets look at a scenario:
Mary turns 65 in July 2018. She meets with Brian before then to get the right Medicare Coverage. She decides to stay with Original Medicare (Parts A and B) and enrolls in a Medicare Supplement. Brian finds the right Medicare Supplement Plan that fits Mary’s Lifestyle and Budget, and then Brian asks her if she wants him to figure out which Part D Prescription Drug Plan is right for her. Mary declines. She says she only takes 1 medication and it costs $4.00 at her pharmacy. So Mary lets Brian know she does not want to enroll in a Part D Prescription Drug Plan and Brian advises her to reconsider her decision, but tells Mary to call him if she has a problem with her medications.
In July 2019, Mary calls Brian, telling him she has been prescribed a few medications she did not anticipate, and that the cost of the medications were VERY HIGH. Almost too high to afford, but the Doctor insists she take them. She needs a Part D Prescription Drug Plan and asks Brian to come out and enroll her in the right Part D Prescription Drug Plan. Brian then gives Mary the bad news:
Unfortunately, Mary cannot enroll in a Part D Prescription Drug Plan until the Annual Enrollment Period (AEP) which is October 15 through December 7.
When Mary enrolls in the correct Part D Prescription Drug Plan on October 15, the plan will not go into effect until January 1, 2020. Mary will have to pay the full retail cost of her medications from July through December. Also, Mary will have a penalty added to her monthly premium. The penalty is calculated as follows:
• 18 months without a drug plan
• 18 months multiplied by 1% of the NAP
• 18 x .3274 = $5.89
• If the monthly premium for the drug plan Brian found for Mary is $30.00 per month, the $5.89 penalty is added to the $30.00 monthly premium EVERY month. So Mary’s premium is not $30.00, but it is $35.89, every month… and the penalty NEVER goes away, no matter how many times she needs to change drug plans. The penalty will ALWAYS be added to the Part D Prescription Drug Plan premium Mary pays.
So, Do you need a Part D Prescription Drug Plan??