What is the Medicare Part D Penalty?
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.
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
For more information about Medicare enrollment and penalties, see When to sign up for Medicare benefits and Medicare Enrollment – What you need to know
💡 Your next step: Late enrollment penalties are one reason comprehensive coverage matters from day one. See how Medicare Supplement plans protect you from unexpected costs.
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Written by Michael Quinn
Licensed Broker, REMEDIGAP Founder
Fact Checked by Joann Quinn
Chief Compliance Officer
As a licensed insurance broker, REMEDIGAP upholds the principles of integrity in our editorial standards and ensures transparency in how we receive compensation from our insurance partners.