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How Much Will Enrolling Late In a Medicare Drug Plan Cost?
By Sarah Rubensiein, The Wall Street Journal
October 21, 2005
For many seniors, the first big decision this fall isn't which Medicare prescription-drug plan to choose. It's whether to sign up at
all. A late-enrollment penalty is supposed to make the answer more
clear-cut. The long-awaited Medicare prescription-drug benefit, which starts Jan. 1, promises to let millions of seniors and the disabled get drug coverage by choosing among a variety of plans offered by private
insurers.
Here's a simplified description of the late-enrollment penalty: For as long as you're covered by a Medicare drug plan, add 1% to your premium for every month you delayed enrolling after the deadline and didn't have other comparable coverage, such as a plan offered through an
employer.
The idea of the penalty is to encourage healthy people to sign up now, rather than wait until they actually need the coverage. Without a group of people paying for the plans but drawing little in return, the program's cost -- already projected at $720 billion over the first 10 years -- would likely mount under the burden of sick people's
expenses.
The penalty may already sound costly. To really figure out what it means, though, there are more details to consider, illustrating just how quickly the expense can
mount. A few weeks can mean a lot. Missing the deadline by one month doesn't necessarily mean you'll add only 1% to your premium. The cost is likely to be a lot greater, thanks to the way enrollment in the drug benefit
works.
This year, the enrollment period lasts from Nov. 15 to May 15, 2006. But once that deadline passes, you generally won't have another opportunity to sign up for a drug plan until the typical open-enrollment period, from Nov. 15 to Dec. 31 each year. Your plan won't start until the following
January. So how does that affect the math? If you're eligible for coverage and miss the May 15 deadline, your penalty will be at least 7%, covering the seven months that will have elapsed between May and January. It keeps working that way: If you miss the typical December deadline, you'll add at least 12% to your premium because you won't be enrolled for the entire following year. "It comes down to being 12 months," says Peter
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