Medicare and Me: The Part D Penalty Box

Leah Sugar Kari, AMR, FHIAS

“Nobody told me I needed prescription drug coverage.” The bright gentleman sitting in front of me explained that he hadn’t had a drug plan for twelve years. He faced losing a generous employer monthly contribution to his health insurance if he didn’t enroll in a plan. He obviously didn’t know about the Part D Penalty Box.

Ouch. In 2006, Congress mandated that Medicare beneficiaries have prescription drug coverage or pay a penalty. The plans provided a cap to what people paid for medicine, particularly in catastrophic illnesses. Both the plan and the member shared the cost of drugs through the initial stages of drug coverage.

Enjoying good health, the gentleman opted not to enroll in a plan during his initial enrollment period (three months prior to his 65th birth month, that birth month, and three months after). Had his company offered creditable drug coverage (as good as what Medicare offered), he could have postponed enrolling without penalty. Healthy newcomers to Medicare might minimize the need to enroll in drug coverage at the correct time. Good health isn’t guaranteed, and a serious illness requiring costly medications can happen to anyone, and one pays a penalty.

Bearing the bad news, I advised that Medicare assesses a 1% penalty for every month a beneficiary goes without drug coverage when he should have enrolled. It’s based on the “national average premium” for drug plans and changes yearly. I estimated the penalty at about $50 plus his monthly plan premium. Further, the penalty would continue the entire time he maintained prescription drug coverage.

There’s more. In addition to penalties for late enrollment, there is an income adjustment for those whose modified adjusted gross income was over $87,000 to $109,000 (individual) or $174,000 to $218,000 (per couple). These levels are based on your 2018 income tax return and raise your monthly drug premium $12.20 per month.

Arizona drug plan monthly premiums range from $13.10 up to $98, with different formularies and drug pricing. Avoid the late enrollment penalty. Enroll during your initial enrollment period in a “stand alone” plan or a Medicare Advantage plan with drug coverage. Medicare requires that there be a minimum of two drugs in each therapeutic category, so no matter what plan you pick, you’ll have coverage for what ails you now or what lies ahead.

For more information about drug plans, call Medicare at 1-800-MEDICARE (1-800-633-4227) or TTY users dial 1-877-486-2048. Consult your licensed insurance agent or broker, or visit to better understand your responsibilities as a Medicare beneficiary.

You’ll enter Medicare sure footed in your knowledge and sidestep the Part D penalty box.

Leah Sugar Kari, AMR, FHIAS, is a local licensed life and health insurance agent specializing in showing Medicare eligible people their insurance options. Reach Leah for comments at 520-484-3807 or [email protected] (TTY users dial 711).