Q: If you don’t sign up for prescription [drug coverage under Medicare when you’re first eligible], when you do want to do it later on, when you think you need the medicine, they charge you a penalty. All right? It’s very annoying.

–S.C., Providence

A: The penalty is an important point to keep in mind when you’re deciding whether to sign up for a prescription drug plan under the federal Medicare health insurance program.

If you don’t sign up when you first become eligible, odds are that you’ll have to pay a late-enrollment penalty if you sign up later on.

In general, the penalty amounts to 1 percent of the national average plan premium.

That may not seem like much. But keep in mind that it’s multiplied by the number of months you were eligible to join but didn’t, said Deane Beebe, communications director for the Medicare Rights Center, an independent source of health-care information and help for Medicare beneficiaries.

Also bear in mind that the penalty doesn’t disappear; you keep paying it – as an addition to your regular monthly premium – for as long as you’re in a plan.

Beebe offered this example:

Suppose you were first eligible to sign up for a Medicare prescription drug plan – but did not – during the program’s initial enrollment period, which ended May 15, 2006.

Suppose you now decide to sign up, during the current open enrollment period, which ends Dec. 31. That means your coverage will kick in on Jan. 1, 2007. By that date, seven full months will have passed (May doesn’t count as a full month), Beebe said.

For 2007, the national average is $27.35. One percent of that is 27 cents. So, in this example, the premium penalty you’ll have to pay in 2007 will be $1.91 a month (that’s 1 percent of $27.35, times seven months).

If, in this example, the average national premium for 2008 is $35 a month, your premium penalty in 2008 would be $2.45 a month (that’s 1 percent of $35, times seven months).

In other words, if you delay, the penalty can go up over time.

Some Medicare beneficiaries don’t sign up when first eligible because they’re unable to “decipher a very complex and confusing system,” Beebe said in a telephone interview from her group’s headquarters in New York City. For them, the penalty “adds insult to injury,” she said.

Why does the government impose a penalty? The main reason is this: people who sign up late are often the ones who need coverage the most. That drives up the program’s overall costs. The idea behind having a penalty is to encourage as many people as possible – including healthy people – to sign up as soon as they’re eligible, to try to keep costs down.

On its Web site, Beebe’s group has a more detailed explanation of the penalty and how it works:

www.medicarerights.org

A few other points:

•Open Enrollment: The open enrollment period described above – the one that began Nov. 15 and ends Dec. 31 – is mainly for those who have a Medicare prescription-drug plan and are thinking about switching.

It also applies if you were eligible to sign up during the initial enrollment period but didn’t, or if you’re enrolled in a Medicare Advantage plan or a Medigap supplemental insurance plan but want to add or change drug coverage.

However, if you’ve just become eligible for coverage under the main Medicare program, or you’re about to become eligible, you have more breathing room during which to consider signing up for a Medicare prescription drug plan.

In that case, you generally get a seven-month open season. It includes the three months before you become eligible for general Medicare, the month you are eligible, and the three months following.

•More Information: Medicare prescription-drug plans are sometimes known, collectively, as Medicare Part D. For more information on Part D plans – including certain exceptions to the penalty described above – see the annual ``Medicare & You” booklet the government recently mailed. You may also obtain more information directly from Medicare by calling toll-free at 1-800-633-4227, or using its Web site:

www.medicare.gov

The Rhode Island Department of Elderly Affairs is holding a series of workshops throughout the state to answer your questions and help you choose a plan.

The agency’s Senior Health Insurance Program (SHIP) volunteers are available at many locations statewide, including local senior centers.

For more information, call the agency at (401) 462-4000. You may also call “The Point,” the state’s call resource center for elders and those with disabilities, at (401) 462-4444.

Or use these Web sites:

www.dea.state.ri.us

www.ThePointRI.org

A number of pharmacies are also helping Medicare beneficiaries pick a plan that suits them best.

•Part D Appeals: The Medicare Rights Center also maintains a toll-free “Medicare Drug Plan Appeals” hotline, at 1-888-466-9050. It’s a free service for people enrolled in a Medicare drug plan who have been denied prescription drugs.

The center’s counselors and lawyers can help if, for example, you need to file an “exception” because your drug is not on your plan’s formulary, or if you can’t get a needed drug because your plan has restrictions requiring such things as prior authorization, quantity limits, or “step therapy.”

TODAY’S TIP: Trying to find some ways to save money? The Federal Citizens Information Center has a brochure, “66 Ways to Save Money.” It includes tips such as how to spend less on cell phone service, air fares, groceries and other items.

To order, send your name, address, and a check or money order for 50 cents to: Federal Citizen Information Center, Dept. 342N, Pueblo, CO 81009. To order by phone with a credit card, call the center toll-free at 1-888-878-3256, and ask for Item 342N. For more information:

www.pueblo.gsa.gov

Neil Downing is a Journal staff writer and author of The New IRAs and How to Make Them Work for You. Questions about your money matters? Call us at 1-401-277-7484 and leave a message, or e-mail:

moneyline@projo.com

Sorry, no personal replies; as many questions and issues as possible will appear here.