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The Premium Penalty - The High Cost of Waiting
If time is money, then "Procrastination" also has a price. It now seems that even doing nothing may have a high cost when it comes to the Medicare Part D program.
Although the topic is still being discussed in Washington, there will be an additional monthly cost to those who enroll in a Medicare Part D plan after the close of their Initial Open Enrollment period.
As already mentioned, the first Medicare Part D Open Enrollment period began November 15, 2005 and ended May 15, 2006. After that historic Monday, May 15 date, the cost for some Medicare Beneficiary's Medicare Part D Prescription Plans increased an estimated 1% for each month until the beneficiary enrolls in a Medicare Part D Plan. For those missing the May 15 deadline, the total increase for 2006 was an automatic 7% (representing the delay from May to December 2006). This percentage is then multiplied by the average premium cost for Medicare Part D plans (in 2006, this value is around $32.50). Some have called this cost increase a "life-time premium penalty".
How will this work? Well, if this year's average monthly premium for a Medicare Part D plans is $32.50 per month, a person who waited 7 months to enroll in a Medicare Part D plan would add an extra $2.25 per month to their monthly premium (calculated - 1.07 * $32.20 = $34.45 or an additional $27.00 per year). The premium "penalty" will stay in effect for the life of the Beneficiary's Medicare Part D plan and may even increase over time (although in 2007 the average value of a plan will be reduced to $27.35).
Please note, that these penalties or additional costs may not apply if you currently have drug coverage through a former employer or union considered by the Centers for Medicare and Medicaid Services (CMS) as "creditable coverage".
Last updated on: 07/05/2009
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Life Insurance plays an important role in your families financial stability.
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