En español | The late enrollment penalty is a surcharge permanently added to the monthly premium of your Part D prescription drug plan if you fail to sign up when you’re first eligible for Medicare and you don’t have similar drug coverage.
Medicare calculates the penalty based on the number of months you delayed Part D enrollment and were without comparable drug coverage. This penalty applies after you enroll in either a stand-alone Part D plan to accompany original Medicare or a Medicare Advantage plan with drug coverage, unless you qualify for an exception.
The Part D penalty has been in effect since Medicare introduced the drug benefit in 2006. At that time, people already in Medicare could sign up until May 15, 2006, without incurring a late enrollment penalty. Since then, Medicare has enforced the penalty policy for anyone who goes beyond 63 consecutive days without similar drug coverage after their Part D initial enrollment period.
How do I avoid a Part D penalty?
You won't be liable for a late enrollment penalty if you have prescription drug coverage from another source that’s considered to be at least as good as Medicare Part D, called “creditable coverage.” Coverage from an employer, a former employer, Tricare, the Department of Veterans Affairs or another source may qualify.
If you have prescription drug coverage, every September you should receive a letter from your employer or insurance plan that identifies whether your plan is considered creditable coverage. If you lose your drug coverage, you’ll be eligible for a two-month special enrollment period when you can sign up for a Part D plan without penalty.
Keep the letter as proof that you had creditable coverage when the time comes to enroll.
Other circumstances when you won’t be liable for Part D penalties:
• If you receive Extra Help, a federal program that helps people with low incomes and assets pay Part D premiums and out-of-pocket costs.
• If you’ve been living outside the United States or have been in prison — situations in which you can’t receive Part D drug coverage — you can 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 of Medicare at age 65, you weren’t eligible to buy Part D yet. You can only get a Part D plan after you enroll in either Part A or Part B, so you can’t be penalized for late enrollment until you sign up for either part. But you must get Part D within two months of enrolling in Part A or Part B to avoid penalties, unless you have other creditable coverage.
For example, some people who work for a company with 20 or more employees may want to delay enrolling in Part A and Part B while working, so they can contribute to a health savings account because you can’t make new HSA contributions after you enroll in Medicare.
How much is the Part D penalty?
Medicare calculates a Part D penalty based on the number of months you went without eligible coverage. You pay 1 percent of that year’s national base beneficiary premium multiplied by the number of months you were without creditable drug coverage since enrolling in Part A or Part B.
The Part D penalty has no cap. The base beneficiary premium, which is calculated by the Centers for Medicare and Medicaid Services each year, is slightly different from the national average Part D premium.
For example: The national base beneficiary premium is $32.74 a month in 2023. If you went 29 months without creditable coverage, your penalty would be $9.50.
The calculation: 29 x 0.3274 = $9.495, but the penalty is always rounded up to the nearest 10 cents.
Medicare adds this amount to your regular Part D premium each month. The penalty lasts for as long as you have Part D coverage, and the amount is recalculated with each year’s national base beneficiary premium.
Can I dispute the late enrollment penalty?
If you disagree with the penalty, you can request reconsideration within 60 days from the date Medicare notified you about the assessment.
Ask your Part D plan provider for the paperwork or download the official form from CMS; complete the form; and submit proof that supports your case, such as copies of notices showing you had creditable prescription drug coverage during that time.
Keep in mind
You may not want to pay Part D premiums if you don’t take any or many medications, but you could still be liable for the late enrollment penalty if you don’t have equivalent drug coverage. To avoid a penalty, sign up for a low-premium Part D plan and switch during open enrollment if any medications prescribed later are too expensive or not covered under a more economical plan.
Updated January 11, 2023
