To keep insurance costs down, the pool of recipients has to be as deep as possible. Medicare Part D is a voluntary part of Medicare. A person can choose to have a policy or not to have a policy. If a person chooses not to enroll in a Part D program, they will pay a penalty if they choose to enroll at a later time.

Every year, a Late Enrollment Premium Penalty is set. In 2012, that amount was $0.31 for each month someone is not enrolled after they become eligible. That amount comes from a specific calculation of 1% of the base premium amount for the given year.

Let’s say you became eligible for Medicare benefits in July of 2009. You decide that you do not want Part D coverage at that point. You do not enroll until coverage on January 1, 2012. That means you went 30 months without Part D coverage. The penalty calculation is the number of months without coverage multiplied by the Late Enrollment Premium Penalty for the year of initial coverage. For this example, that calculation is 30 x $0.31, or $9.30.

But, the $9.30 penalty is not a onetime charge. It is the amount that is added to the Part D premiums every month going forward. So, if you signed up for a Medicare Part D plan with a base premium of $30 each month, the amount you would pay would include the calculated penalty. The total would then be $39.30.