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What is the Medicare Part D late enrollment penalty?

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.

After you’ve enrolled, whether you choose a stand-alone Part D plan to accompany original Medicare or a Medicare Advantage plan with drug coverage, Medicare calculates the penalty based on the number of months you delayed Part D enrollment and were without comparable drug coverage. 

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?

If you already 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” or as good as Medicare Part D. 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. You won’t be liable for a late enrollment penalty if you have prescription drug coverage from another source that is considered creditable coverage, such as coverage from an employer, a former employer, Tricare, the Department of Veterans Affairs or another source. 

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 of the United States or have been in prison — situations where 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 Medicare parts A and B at age 65, you weren’t eligible to buy Part D yet. Because Part D requires enrollment in either part, you can’t be penalized for late enrollment.

People who work for a company with 20 or more employees, continue at their job after age 65 and want to contribute to a health savings account (HSA) are likely to delay enrolling in Medicare. Participation in a high-deductible health insurance plan allows you to make pretax HSA contributions that you don’t have to spend in the year you deposit them, so you can save tax free for future medical expenses and kick in $1,000 more than younger workers if you’re 55 and older. 

But you can’t make HSA contributions after you sign up for Medicare. To avoid penalties, you must sign up for a Part D plan within two months of enrolling in parts A or B unless you have other creditable coverage.

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 average Part D premium, what the Centers for Medicare and Medicaid Services (CMS) calls the 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.

For example: The national average premium is $33.37 a month in 2022. If you went 29 months without creditable coverage, your penalty would be $9.70.

The calculation: 29 x 0.3337 = $9.68. 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 when the national average premium changes each year. 

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. Medicare also has contracted with a company that has created a website where you can file your appeal.

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 May 13, 2022



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