a penalty paid by an individual. The penalty is in the form of a 1%-per-month higher premium. The premium is cumulative; that is, for each month not enrolled, the individual can expect to pay an additional 1%. At the end of one year, this would result in an additional 12% on the premium. That penalty will be in effect for the life of the Medicare person. CMS may determine after 2006, whether a different amount should be applied rather than the 1%.

Congress wants to encourage as many people as possible to enroll in a Medicare Prescription drug plan when first eligible. To do this, it has created a late enrollment penalty to discourage putting off enrollment. This penalty is an increase to your premium cost of at least 1% for every month that you delay enrolling. There is no limit to the penalty, and this increased premium lasts as long as you are enrolled in a Medicare drug plan. The penalty won't apply if you move from a plan that offers creditable coverage to a Medicare drug plan at a later date. See creditable coverage.

The additional cost you will have to pay if you do not have creditable prescription drug coverage and enroll in a Medicare prescription drug plan outside your regular open enrollment period. The penalty is in addition to your monthly premium. The penalty lasts as long as you are enrolled in a Medicare Prescription Drug program.