In the article "Medicare Prescription Drug Update" in the November 2005 Seniors Digest, we encouraged you to take a few steps to find out if you qualify for additional help in paying for your drugs, and which tools and resources are available for you to use. Now, in this article, we want to take a deep breath with you, and look at two questions you are facing: when do you need to sign up, and what is that "penalty"?

When should you sign up for a drug plan?

It depends on your resources and what drugs you currently take.

If you are currently eligible for Medicare and Medicaid, you likely have received a letter in the mail stating that you have been automatically enrolled in a drug plan. If you have not received this letter, or if you find that the plan you have been enrolled in does not cover your prescription drugs, please call 1-800-633-4227 as soon as possible. 

If you take prescription drugs, and have decided that the amount you currently pay for those drugs is more than you would pay under one of the drug plans, sign up now. To make that decision, call 1-800-633-4227 or go to www.medicare.gov.  You will need to have a list of the prescriptions you currently take. The process to enroll takes most people approximately 30 to 45 minutes. By signing up now, once you have met the annual deductible amount (if your chosen plan has one) you will begin to see a reduction in the amount you pay for your drugs. 

If you do not take prescription drugs at this time, or the amount you pay is affordable, then you may decide to wait to choose a prescription drug plan. (Remember, the deadline to enroll without a penalty is May 15, 2006.) Or, you may decide to select a plan at that time based primarily on the premium amount, since the drug coverage may not be your primary concern. If later in life, your drug needs change, you may switch to a different plan during the annual open enrollment phase. 

Finally, if you are enrolled in a "creditable" plan (meaning that the coverage is as good, as if not better, than the plans that Medicare will offer), you may not need to do anything further. Your current plan should have sent you a letter telling you if your coverage is creditable.

What is the "Penalty"?

The "penalty" is an incentive built into the Prescription Drug Plan to encourage eligible Medicare recipients to enroll in an individual plan before May 15, 2006. The penalty for those people who enroll in a plan after May 15, 2006 will be a higher premium 1 percent of the national average premium, multiplied by the number of months between May 15, 2006 and the next available coverage period, which begins in January of the following year. 

To break down that last sentence into something understandable, please read on. Right now, the "national average premium" is $32.50. (However, that will change. For example, in seven years, the national average premium could be $60.00. The 1 percent per month penalty will change as the national average premium changes.)
 
Another consideration is the number of months between May 15, 2006 and the next available coverage period.  If a Medicare recipient decides to sign up for a plan in June of 2006, the number of months to the next coverage period would be seven months. Why seven? Why not one? Because that's the number of months between May 15, 2006 until January 1, 2007, which is when the next coverage period begins. For each year you wait to enroll, an additional 12 months will be added to the first seven months. 

Two examples:

If you miss the May 15, 2006 deadline and you are not eligible for Medicaid, the next time you can enroll in a drug plan is in the regular Medicare open-enrollment period, which is between November and December. That plan will begin in January of 2007. Your penalty would be 7 (months) multiplied by 1 percent multiplied by $32.50 (the national average premium), which equals $2.28 in addition to your monthly premium. 

If you wait until 2007 to enroll, the amount of penalty you pay would be: 7 plus 12 months multiplied by 1 percent multiplied by $32.50 (or the current national average premium), which equals $6.16 per month in addition to your monthly premium. Each time the national average premium changes, your penalty will change as well. As you can see, deciding to wait to enroll has implications for your wallet.

For More Information....

Visit www.medicare.gov on the web or call 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048. For more information on who can get extra help with prescription drug costs and how to apply, call SSA at 1-800-772-1213 or visit www.socialsecurity.gov on the web.

You may also call Seattle-King County Senior Information and Assistance at 1-888-435-3377.