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Ask Ms. Medicare

Paying for the Part D Late Penalty

Q. I was eligible for Part D drug coverage when it began in 2006 but didn’t sign up then because I didn't take any medications. Now I need to join the program, but I’ve been told I must pay a late penalty.  How much will this be?

A. The Part D late penalty is calculated by multiplying the number of months you’ve been without drug coverage by one percent of the national average premium (NAP), which is the average of all Part D plans nationwide in any given year.

When the Part D program began in 2006, people already in Medicare could sign up until May 15 of that year without incurring a late penalty. As you could have enrolled then, but didn’t, you can sign up only during the annual open enrollment period, which runs from October 15 to December 7 each year, with coverage beginning January 1—just like anybody who misses their enrollment deadline.  In your case, if you sign up with a Part D drug plan during open enrollment in 2015, you’ll have been without drug coverage for 115 months (June 2006 through December 2015).  The NAP for 2016 is $34, and one percent of this amount is 34 cents. So your late penalty in 2016 is calculated as 115 x 34 cents = $39.10. This will be added to the monthly premium of whichever Part D plan you enroll in for 2009.

The penalty is added to your premiums for as long as you stay in the Part D program—and it’s possible that you may pay higher penalties in future years. That’s because each year your late penalty will be recalculated. The number of months you’ve been without coverage (115 in your case) remains constant. But if the NAP goes up, so does the one percent multiplier. For example, if the NAP in 2017 rises to $36, your monthly late penalty would be 115 x 36 cents = $41.40. Similarly, if the NAP goes down to $32, the penalty would also reduce: 115 x 32 cents = $36.80.  If the amount turns out to include an odd number of cents, Medicare rounds it to the nearest 10 cents.

The late penalty applies only to people who have missed their personal deadline for signing up for Part D and do not have creditable coverage from elsewhere, such as from a former or current employer or the Veterans Affairs health system. (“Creditable” means that Medicare considers it at least as good as Part D.  If you have drug coverage from elsewhere, the plan must inform you whether its creditable or not.) The deadline varies according to circumstances. It may be when you first join Medicare, or it may be when you lose creditable coverage, for example when an employer’s plan terminates. Or it may be when you return to the United States after living abroad or are released from prison. In all these circumstances, you're allowed a certain length of time (usually two months) to sign up with a Part D plan without penalty. Click here for more detailed information on how to avoid a late penalty.

Here are some more examples of late penalties for 2016, according to the number of months without creditable drug coverage:

Deadline for joining Part D without penalty

Date Part D coverage begins

Months without coverage

Late penalty calculation

for 2016

Monthly penalty paid in 2016*

December 2015

January 2016

0 months

Not applicable

$0

March 2015

January 2016

9 months

9 x 34 cents

$3.10

August 2014

January 2016

16 months

16 x 34 cents

$5.40

November 2010

January 2016

61 months

61 x 34 cents

$20.70

May 2006

January 2016

115 months

115 x 34 cents

$39.10

* Rounded to the nearest 10 cents, according to Medicare regulations

It’s important to understand that you can’t sign up for Part D coverage just when you want it or need it. Once you’ve missed your deadline, you can sign up only during open enrollment near the end of the year.  And if you miss that window also, you must wait until open enrollment the following year, which means another year without drug coverage and 12 more months added to the late penalty calculation.

If you receive Extra Help: You will not face a late penalty if you qualify for Extra Help, the program within Part D that provides low-cost drug coverage to people whose income and savings are below a certain level, and you will be able to sign up with a Part D drug plan or switch to another at any time of the year.


Patricia Barry is a features editor for AARP Publications and the author of Medicare For Dummies, 2nd edition (Wiley/AARP, September 2015)

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