7 Tips for Picking a Medicare Part D Plan

Some plans will be eliminated. New regulations aimed at getting rid of plans that are duplicative or with low enrollment have resulted in fewer Part D plans being offered next year. A record low of 1,109 prescription drug plans will be offered nationwide next year, down 30 percent from the 1,576 plans in 2010, KFF found. But you're still likely to have a wide variety of plans to choose from in your area. The average Medicare beneficiary will have a choice of 33 prescription drug plans in 2011. If your current plan will be eliminated in 2011, you will be automatically assigned to another plan with the same provider unless you choose a new one on your own.

[See 5 Ways Retirement Tax Breaks Will Change in 2011.]

Watch out for late enrollment penalties. It's best to sign up for Medicare Part D when you reach age 65 or lose your employer-sponsored prescription drug coverage. Those who delay their start date or go without prescription drug coverage for 63 days or more in a row will have to pay a late enrollment penalty. "It's an incentive so that people don't wait until they are really sick and then buy in," says Elizabeth Hargrave, a senior research scientist at the University of Chicago's National Opinion Research Center. "The longer you wait, the more your penalty will be once you are finally enrolled." The late enrollment penalty will be calculated in 2011 by multiplying 1 percent of the national base beneficiary premium ($32.34 in 2011) times the number of full months that you were eligible for but didn't join a Medicare drug plan. The final amount is added to your monthly premium for as long as your participate in any Medicare drug plan. For example, if you became eligible for Medicare Part D on May 15, 2006, but didn't sign up until 43 months later on Jan. 1, 2010, you will be charged a monthly penalty of $13.90 in 2011. The penalty amount could increase in future years as the national base beneficiary premium amount used in the calculation rises.

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