Medicare Part D Penalty

You are subject to a late enrollment penalty if you go without prescription drug coverage for 63 continuous days at any point after your Medicare initial enrollment period and later choose to elect coverage. You can avoid the penalty by enrolling in Part D or in another creditable drug plan when first eligible. Once you qualify for the penalty, you will pay higher premiums for as long as you are enrolled in coverage.

Christian Simmons, writer and researcher for RetireGuide
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APA Simmons, C. (2022, March 31). Medicare Part D Penalty. RetireGuide.com. Retrieved May 25, 2022, from https://www.retireguide.com/medicare/part-d/penalty/

MLA Simmons, Christian. "Medicare Part D Penalty." RetireGuide.com, 31 Mar 2022, https://www.retireguide.com/medicare/part-d/penalty/.

Chicago Simmons, Christian. "Medicare Part D Penalty." RetireGuide.com. Last modified March 31, 2022. https://www.retireguide.com/medicare/part-d/penalty/.

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What is the 2022 Medicare Part D Penalty?

Medicare Part D plans are available through private insurers. Coverage is optional for Medicare beneficiaries, but choosing to opt out of prescription drug coverage could prove costly.

Beneficiaries who didn’t sign up for a Part D or similar prescription drug plan during their initial enrollment period become responsible for monthly penalty fees if they do eventually choose to enroll.

These Part D late enrollment penalty fees go into effect if at any point after initial enrollment you go 63 consecutive days without prescription drug coverage. The penalty — a 1% surcharge on the national base beneficiary premium for each month you go without coverage after first reaching eligibility — has the potential to become significant for beneficiaries who go years without prescription drug coverage.

Consider the following scenario: A healthy 66-year-old Medicare enrollee pays for his few medications out-of-pocket instead of enrolling in a prescription drug plan. At age 70, doctors diagnose the same man with a chronic heart condition and he decides that enrolling in Part D will save him money on his prescriptions each month. Because he chose not to enroll in a plan when he was first eligible, he now has to pay a hefty monthly premium penalty surcharge for prescription drug coverage for the rest of his life.

Once penalized, there is typically no way to remove the penalty for as long as you have Medicare. Even if you eventually switch to another Part D plan, you will still have to pay the penalty in the form of higher monthly premiums. This could amount to 20 to 30 years of monthly penalty payments in some cases.

When Did the Medicare Part D Penalty Start?

The Part D late enrollment penalty began when Part D prescription drug plans first became available to Medicare beneficiaries in 2006.

There are similar Part A and Part B late enrollment penalties for beneficiaries who didn’t sign up for Original Medicare when they first became eligible.

How To Avoid the Medicare Part D Late Enrollment Penalty

The easiest way to avoid paying a penalty for Part D coverage is to sign up for a prescription drug plan as soon as you are initially eligible. The penalty fee does not come into play until you have gone 63 consecutive days of being eligible without coverage, so you will have just over two additional months after your initial enrollment period ends to join a plan without being penalized.

You can also avoid the penalty without signing up for Part D by having creditable drug coverage from another source. According to AARP, this can include drug coverage from an employer or a spouse’s plan.

For your drug coverage to be considered creditable for Medicare Part D, it must cover at least everything that a Part D plan would. As long as you have creditable coverage, you won’t be penalized — even if you didn’t sign up for Part D when you became eligible.

While creditable coverage can keep you from being penalized, it’s important to remember that not all forms of prescription drug coverage are ‌creditable. Your plan is required to tell you if it is creditable or not.

To qualify as creditable for Medicare Part D, a plan must:
  • Pay at least 60% of prescription drug costs
  • Cover brand-name and generic medications
  • Offer a variety of pharmacies
  • Have a low deductible or no annual benefit cap

If you lose your creditable coverage, the 63-day countdown begins and you will have to find another source of creditable coverage or sign up for Part D to avoid the penalty. Missing your window and being penalized will immediately increase your Part D costs.

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How To Calculate Part D Penalty Fees

In order to calculate your Part D premium penalty, you need to know the national base beneficiary premium. This number changes every year and is essentially the average premium for a Part D plan across the country. In 2022, the base beneficiary premium is $33.37.

To figure out your penalty, take 1% of the base beneficiary premium and multiply it by the number of months that you were eligible for Part D but didn’t have a plan. The resulting figure is rounded to the nearest $.10 and is the surcharge added on to your plan’s premium each month.

Medicare Part D Penalty Example

It’s important to remember that your penalty amount may change each year even after you have coverage. This is because the base beneficiary premium is updated annually and Medicare will recalculate your penalty surcharge using the latest figure.

Frequently Asked Questions About Part D Penalties

Is there a Part D penalty cap?
The penalty fee you’ll incur for Part D will continue to grow as long as you do not have a Part D plan or creditable coverage. Your penalty will increase each full month that you do not have coverage. Medicare has not defined a cap on the penalty amount.
Can you appeal a Part D late enrollment penalty?
You can appeal and ask for a reconsideration of your Part D penalty through the U.S. Centers for Medicare & Medicaid Services (CMS). CMS will typically return a decision within 90 days of the appeal. Remember that for an appeal to be successful, you must legitimately have a reason that they should not penalize you, like providing proof that you had creditable coverage.
Are there exceptions to the Part D penalty?
The major exception to the Part D penalty is if you had drug coverage from another source that was equal to or better than Part D. This is known as creditable coverage. A common example would be coverage you have from an employer. If you become eligible for Part D but already have creditable coverage, you can remain with your current plan without being penalized.
Last Modified: March 31, 2022

3 Cited Research Articles

  1. U.S. Centers for Medicare & Medicaid Services. (2021). The Part D Late Enrollment Penalty. Retrieved from https://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/downloads/11222-P.pdf
  2. AARP. (2015, August). Paying the Part D Late Penalty. Retrieved from https://www.aarp.org/health/medicare-insurance/info-12-2008/ask_ms_medicare_paying_for_the_part_d_late_penalty.html
  3. U.S. Centers for Medicare & Medicaid Services. (n.d.). 3 ways to avoid the Part D late enrollment penalty. Retrieved from https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty/3-ways-to-avoid-the-part-d-late-enrollment-penalty