The initial enrollment period for Medicare Part D ended almost three months ago on May 15, 2006.  With a few limited exceptions, Medicare beneficiaries who did not enroll in a Part D drug plan by that date must wait until the next annual coordinated election period beginning on November 15, 2006 to choose and enroll in a drug plan.

Additionally, unless beneficiaries can show that they had other drug coverage which was as good as Medicare drug coverage (creditable coverage), people who did not enroll in Part D will be assessed a late enrollment penalty of one percent (1%) of the average premium for each month of delayed enrollment.  The penalty remains in effect for the duration of their enrollment in a Part D plan.  Because the average premium upon which it is based will vary each year, the amount of the penalty will change as average premiums change.  In other words, an individual who enrolls in 2007 and is assessed a late penalty can expect to pay a different late penalty amount each year, depending on whether the average premium remains the same, decreases, or increases.

According to the Kaiser Family Foundation, between 4 and 5 million Medicare beneficiaries, or about 10% of those with Medicare, did not enroll in Part D or do not have creditable drug coverage from their employer or from another source. Most importantly, Kaiser estimates that about 3.3 million beneficiaries, or about 75% of those who do not have drug coverage, are eligible for the low-income subsidy (LIS) known as extra help. Prescription Drug Coverage Among Medicare Beneficiaries (June 2006), http://www.kff.org/medicare/upload/7453.pdf.    Thus, the overwhelming majority of Medicare beneficiaries against whom a late enrollment penalty may be assessed are people with incomes below 150% of the federal poverty level and resources below $10,000, the income and resource eligibility limits for LIS.

Although LIS provides assistance with Part D out-of-pocket costs, including premiums, LIS-eligible individuals still must pay a late penalty on their premiums if they delay enrollment in a Part D plan.  Those who are eligible for a partial subsidy (incomes between 135% and 150% of poverty and resources up to $10,000) receive no assistance with the premium penalty.  Like non-subsidy eligible individuals, they must pay the full penalty for as long as they are enrolled in a Part D drug plan.  Individuals eligible for the full subsidy (incomes below 135% of poverty and resources up to $6,000) must pay 20% of the late penalty on their premiums for 5 years.  After 5 years, the subsidy pays the full late penalty amount.

It is ironic that the beneficiaries Congress meant to protect through the LIS against high out-of-pocket costs associated with Part D will be the beneficiaries who are penalized for delayed enrollment in Part D.  The beneficiaries who fall within this group are generally hard to reach and still may not be aware of the additional assistance provided by LIS.  Even with the LIS “extra help,” many subsidy eligible individuals find Part D financially burdensome.  Imposition of even a small penalty amount will increase the burden for those who do not enroll timely and may discourage them from enrolling in a Part D plan for 2007.

Last May, after the initial enrollment period closed, bills were introduced in both the Senate (S.2810) and the House of Representatives (H.R. 5399) to eliminate the late enrollment penalty for 2006.  The Senate bill, S.2810, also provides additional funding for state health insurance assistance programs (SHIPs) and Area Agencies on Aging, for counseling about Medicare.

The Congressional Budget Office (CBO) has recently reduced its estimate of the cost of delaying the penalty from $3.4 billion (March 2006 estimate) to $835 million (August 2006 estimate).  The reduction is based on CBO’s estimate of approximately 3 million beneficiaries who would be subject to the late penalty, half of whom would also be eligible for LIS.  Although CBO’s estimate of the number of beneficiaries subject to the penalty and the number who are also LIS-eligible is lower than the Kaiser figures, the CBO estimate also demonstrates that the late enrollment penalty will be borne primarily by those whom Congress most intended to help with Part D.

Advocates are encouraged to contact their members of Congress on behalf of low-income clients to ask that the penalty for late enrollment in Part D be waived.

Advocates are also reminded that it is not too late to assist all Medicare beneficiaries, whether or not they are enrolled in a Part D plan, in applying for LIS.  Beneficiaries may apply for LIS at any time.  If they qualify, and they are not already in a plan, they do not have to wait for the annual coordinated election period to enroll in a Part D plan.  Further, people who are found LIS eligible and who enroll in a plan before November 15 will not have to pay the penalty.    In other words, LIS-eligible individuals who delay applying for LIS and enrolling in a plan until the next election period will be subject to a penalty, whereas individuals who apply and are found eligible for LIS and who enroll in a Plan now will not be penalized.

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