What is the Medicare Part D Penalty? - 3 Ways to Avoid It!

One of the most important things that Medicare beneficiaries need know is that there is a late-enrollment Penalty for Medicare Part A, Part B, and Part D plans. This guide will provide you everything you need to know about the Medicare Part D penalty and how to avoid it.

Medicare Part D Penalty: What is it?

The Medicare Part D late enrollment penalty (also referred as “LEP”) is a specific dollar amount that is added to your Part D monthly Premium. If you have enrolled in a Medicare Part D drug plan, you may be responsible to pay an enrollment penalty. This is typically added to your monthly Part D premium. In other words, you may need to pay a Part D monthly premium that’s higher than if you weren’t penalized.

This penalty will be added for as long as you have a Medicare Part D drug plan. The penalty remains even if you change drug plans or companies.

How the Penalty works

The late enrollment Part D penalty will generally happen for you if the following occurs:

If your Initial Enrollment Period (IEP) has ended
And you go 63 days or more without continuous coverage
And you go without one of the following 4 situations:

Creditable coverage

Creditable Prescription Drug Coverage (for example, drug coverage through your employer).

Different Plan

Another Medicare plan that provides prescription drug coverage (like a Medicare Advantage Plan).

Extra Help

If you qualify for the Extra Help program

Part D

You have a Medicare Part D Drug plan.

EXCEPTION
If you happen to be under 65 and enrolled in Medicare because of a disability and you’re currently paying a premium penalty, as soon as you turn 65 you will not have to pay the penalty.

What if you currently don’t take prescription drugs?

You may want to get a cheap plan even if you don’t have any current medications. In this video, we go over what happens when you don’t buy a Part D drug plan when you’re first eligible for Medicare.

How much are the part d penalties?

How much will you pay for your Part D penalty? The cost will depend on how long you were without a Part D plan (or creditable drug coverage).

Medicare will calculate your late enrollment penalty by taking the 1% penalty rate of the “national base beneficiary premium” and multiplying it by the number of full, uncovered months that you weren’t enrolled in a Part D plan (or creditable drug coverage).

The national base beneficiary premium in 2021 is $33.06.

Your final amount is then rounded to the nearest $0.10 and will be added to your monthly Part D drug premium.

Medicare Part D Penalty Calculator

How much is your Medicare Part D late enrollment fee?

CALCULATE

Example

Here is an example of a common Part D penalty.

Let’s suppose you started shopping and purchased your Medicare Part D Prescription Drug Plan in 2021, nine months after your Initial Enrollment Period (IEP) ended.

One percent of the “national base beneficiary premium of $33.06 is $0.33 which will be multiplied by 9 months.

$0.33 x 9 = $2.97
$2.97 rounded to the nearest $0.10 = $3.00

So, the late enrollment penalty would be about $3.00 and it would be added to the Medicare Part D premium every month. The “national base beneficiary premium” can increase every. Just know that may result in your penalty amount also increasing each year.

Quick Calculation
In 2021, you will multiply the number of months you didn’t have creditable coverage by $.33.

part d penalty FAQ

Is Medicare Part D mandatory?

No. You are not required to purchase a Medicare Part D drug plan. However, you need to understand all of your Medicare enrollment decisions and their timelines. Medicare can apply the Part D penalty to your drug plan’s premiums if you wait too long to enroll in a drug plan after you 1st become eligible.

When did Medicare Part D penalty start?

Part D penalty began in January 1, 2006, when the Medicare Part D prescription drug benefit began. It was authorized by Congress under the “Medicare Prescription Drug, Improvement, and Modernization Act of 2003.”

What if I don’t agree with the late enrollment penalty?

If you don’t agree with the Part D enrollment penalty, you might be able to request Medicare to review the decision. This review is called a “reconsideration.” Your drug plan will need to send info about how to request your reconsideration. The drug plan’s form will list the reasons you can ask for and receive a review of your case.

How will I know if I owe an enrollment penalty??

Once you purchase and join your drug plan, the Part D plan will notify you if you owe a penalty. They will also let you know what your monthly premium will be. You’ll typically need to pay your penalty for as long as you have a Part D plan.

Is there a late enrollment penalty if I wait one month after I was first eligible to enroll in a Medicare drug plan?

No. You must be without creditable coverage continuously for 63 days or more any time after you were 1st eligible to enroll in order to be charged a Part D penalty. Since you only had 1 month without creditable coverage, you won’t have to pay the enrollment penalty.

For more information about Medicare enrollment and penalties, see When to sign up for Medicare benefits and Medicare Enrollment – What you need to know

Michael Quinn

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Michael Quinn is a seasoned Medicare insurance expert and licensed agent dedicated to simplifying the complexities of healthcare coverage. With over a decade of experience, he is a trusted advisor known for his compassionate guidance and commitment to empowering individuals. As the Cofounder of REMEDIGAP in 2013, Michael offers unbiased resources and personalized support to assist clients in making informed decisions.
His expertise has been recognized on reputable platforms such as USA Today and Nerdwallet, solidifying his reputation as a reliable and knowledgeable industry leader. With a Master's Degree in Communicative Disorders, Michael combines strong communication skills with a genuine passion for positively impacting lives through tailored insurance solutions.

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