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How much is the late enrollment penalty for Medicare Part D prescription drug coverage?

En español | Part D late penalties are permanent and are calculated according to how many months you delayed Part D enrollment. But whether you’re liable for penalties depends on your situation.

You will not be liable for Part D late penalties in the following circumstances: 

  • If you’ve had “creditable” prescription drug coverage from elsewhere since enrolling in Medicare Part A and/or Part B, and you sign up with a Part D drug plan within two months of losing this coverage, you’ll avoid late penalties. (“Creditable” means that Medicare considers it of equal or better value than Part D. “Elsewhere” could mean drug coverage from a current or former employer, COBRA, the Veterans Affairs health system, Medicaid, or private insurance that you purchased yourself. The administrators of any of these plans must tell you whether the drug coverage is creditable.)
  • If you receive Extra Help, a federal program that provides Part D drug coverage at low or reduced cost for people with incomes under a certain level, any late penalties are waived. 
  • If you’ve been living outside of the United States, or have been incarcerated in prison — situations in which you can’t receive Part D drug coverage — you avoid late penalties if you sign up with a Part D plan within two months of your return or release. 
  • If you delayed enrolling in both Part A and Part B at age 65, you were not eligible for Part D during that time — because Part D requires enrollment in either Part A or Part B — and therefore you cannot be penalized for late enrollment. (This situation most commonly occurs when people continue working after age 65 and contribute to health savings accounts at work, which is prohibited under IRS rules if they’re enrolled in any part of Medicare. But you must still sign up with a Part D plan within two months of enrolling in Part A and/or Part B, to avoid penalties.)

In all other situations, you are liable for Part D late penalties. Here’s how they’re calculated: You pay 1 percent of the national average Part D premium (known formally as the base beneficiary premium) in any given year, multiplied by the number of months you’ve been without creditable drug coverage since enrolling in Part A and/or Part B. 

For example, if the national average premium is $36 in a particular year, and you had gone for five full years (60 months) without creditable coverage, your penalty would be 60 x 36 cents (1 percent of $36) = $21.60. This amount would be added every month to your regular Part D premiums for that year. You would continue to pay penalties every year that you remain in the program. If the national average premium goes up or down in any given year, the amount of your penalty changes accordingly.  

Before the Part D drug benefit came into effect in 2006, many people had Medigap supplemental insurance policies (labeled H, I or J) that included limited drug coverage. This coverage is not considered creditable. So if you kept one of those policies and now want to sign up for Part D, your late penalties would be calculated according to the number of months that have elapsed since the end of May 2006 (Part D’s first enrollment deadline), unless you qualify for one of the exceptions listed above.  

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