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Medicare Part D Late Enrollment Penalty

Medicare Part D Late Enrollment Penalty
Medicare Part D is prescription drug coverage provided by private insurance companies approved by Medicare. Medicare beneficiaries who are entitled to Medicare Part A and/or enrolled in Medicare Part B, are eligible to sign up for Part D. Some people can't justify paying the additional premium, especially if they are taking little to no medications at the time they are initially eligible. However, by delaying enrollment, you may be subject to the Medicare Part D Late Enrollment Penalty if you sign up for coverage later on.

What is the Medicare Part D Late Enrollment Penalty?

The Medicare Part D late enrollment penalty is an extra amount you pay in addition to your Medicare Part D monthly premium. You may be subject to the penalty if:

  • 1) you do not enroll in a Part D drug plan (or Medicare Advantage plan that has drug coverage) when you are first eligible for Medicare, or
  • 2) at any time after your initial enrollment period is over, there’s a period of 63 consecutive days or more when you don’t have Part D or other "creditable" drug coverage.

Creditable coverage is coverage which, on average, is expected to pay at least as much as standard Medicare prescription drug coverage.

How much is the Medicare Part D Late Enrollment Penalty?

The amount of the late enrollment penalty depends on how long you went without Part D or other creditable drug coverage. It is calculated each year by the Centers for Medicare and Medicaid Services (CMS) and then reported to your Medicare Part D or Medicare Advantage plan. Your plan will then send you a letter regarding the amount of your penalty, which will also detail how the penalty was calculated and explain how you can ask for a review.

How is the Medicare Part D Late Enrollment Penalty Calculated?

The Premium Penalty is calculated by multiplying 1% of the "national base premium" ($35.63 in 2017) times the number of full months you didn't have Part D or other creditable coverage. The penalty is rounded to the nearest $.10 and, most important, added to your monthly Part D premium.

Below are the national base average premiums used by CMS to calculate the late-enrollment penalties for past 10 years:

Year2017201620152014201320122011201020092008
Premium$35.63$34.10$33.13$32.42$31.17$31.08$32.34$31.94$30.36$27.93
*Source: cms.gov

Calculation Breakdown

For example, let's say you were originally eligible to sign up for Medicare Part D drug coverage on February 1st, 2015, but decided for one reason or another, not to sign up until 2016's open enrollment. As a result, your coverage would be effective January 1st, 2017. Here is what the math would look like:

1%   X   $35.63   (2017 national base premium)   X   23 (number of months without creditable coverage) = $8.20

Medicare Part D Late Enrollment Penalty

Calculate Your Medicare Part D Late Enrollment Penalty

Contact us today. We can help estimate your Medicare Part D late enrollment penalty to see approximately how much will be added on to your part D premium.

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Medicare Part D Late Enrollment Penalty FAQs

  • How will I know if I owe a penalty?

    CMS will report your penalty to your Medicare Part D plan or Medicare Advantage plan after you join. Your plan will then send you a letter regarding the amount of your penalty, which will also detail how it was calculated and explain how you can ask for a review of your the Late Enrollment Penalty.

  • Do I have to pay the penalty?

    Yes. By law, the late enrollment penalty becomes a part of the premium, therefore you must pay the penalty. Medicare prescription plans can disenroll you for not paying your premium, including the late enrollment penalty portion.

  • How long will I have to pay the penalty?

    In general, you will have to pay the Medicare Part D late enrollment penalty for as long as you have a Medicare drug plan.

  • Will the penalty amount stay the same?

    The late enrollment penalty is calculated each year. Looking at the table above, you'll notice "national base premiums" steadily increased year after year, with the exception of 2012. From 2016 to 2017, the "national base premium" increased 4.5% alone. As a result, the late enrollment penalty will increase as well.

  • How can I avoid the late enrollment penalty?

    1) Sign up for a Medicare Part D Drug Plan when you're first eligible.
    Even if you aren't taking any medications now, chances are you will as you age. Signing up for a drug plan at the start will help you avoid the penalty.

    2) Don't go 63 consecutive days without a Medicare drug plan or other creditable drug coverage.
    Creditable drug coverage can from different sources. Some examples are a current or former employer or union, TRICARE, or the VA to name a few. Your plan must tell you each year if your drug coverage is creditable coverage. Going beyond that 63rd day is when the late enrollment penalty clock starts to tick.

    3) Tell your plan about any drug coverage you have had.
    Even if you are unsure if the coverage is creditable or not, telling your plan may help you avoid the Medicare Part D late enrollment penalty.

  • Can I appeal the late enrollment penalty?

    If you don't agree with your late enrollment penalty, you can ask Medicare for a reconsideration. You'll need to fill out a "reconsideration request form", provided by your Medicare drug plan. You can then submit proof which supports your case, such as information about previous creditable prescription drug coverage.

Medicare Part D Late Enrollment Penalty FAQs

How will I know if I owe a penalty?

CMS will report your penalty to your Medicare Part D plan or Medicare Advantage plan after you join. Your plan will then send you a letter regarding the amount of your penalty, which will also detail how it was calculated and explain how you can ask for a review of your the Late Enrollment Penalty.

Do I have to pay the penalty?

Yes. By law, the late enrollment penalty becomes a part of the premium, therefore you must pay the penalty. Medicare prescription plans can disenroll you for not paying your premium, including the late enrollment penalty portion.

How long will I have to pay the penalty?

In general, you will have to pay the Medicare Part D late enrollment penalty for as long as you have a Medicare drug plan.

Will the penalty amount stay the same?

The late enrollment penalty is calculated each year. Looking at the table above, you'll notice "national base premiums" steadily increased year after year, with the exception of 2012. From 2016 to 2017, the "national base premium" increased 4.5% alone. As a result, the late enrollment penalty will increase as well.

How can I avoid the late enrollment penalty?

1) Sign up for a Medicare Part D Drug Plan when you're first eligible.
Even if you aren't taking any medications now, chances are you will as you age. Signing up for a drug plan at the start will help you avoid the penalty.

2) Don't go 63 consecutive days without a Medicare drug plan or other creditable drug coverage.
Creditable drug coverage can from different sources. Some examples are a current or former employer or union, TRICARE, or the VA to name a few. Your plan must tell you each year if your drug coverage is creditable coverage. Going beyond that 63rd day is when the late enrollment penalty clock starts to tick.

3) Tell your plan about any drug coverage you have had.
Even if you are unsure if the coverage is creditable or not, telling your plan may help you avoid the Medicare Part D late enrollment penalty.

Can I appeal the late enrollment penalty?

If you don't agree with your late enrollment penalty, you can ask Medicare for a reconsideration. You'll need to fill out a "reconsideration request form", provided by your Medicare drug plan. You can then submit proof which supports your case, such as information about previous creditable prescription drug coverage.

Source: Medicare.gov