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Medicare Part D Late Enrollment Penalty: How Much Is the Fee?

There are many benefits to enrolling in Medicare health plans once you reach 65. In addition to medical benefits like doctor’s visits and annual exams, members can receive drug prescription coverage through Medicare’s Part D plan. However, if you fail to enroll in the Part D plan and go without it, you may be faced with a late enrollment penalty fee.

Key takeaways:

What is Medicare Part D?

Medicare Part D is a drug prescription plan for members who enroll in Medicare benefits. This plan gives members access to various prescription drugs, including name-brand and generic drugs. Most plans are broken down into tiers that categorize the types of drugs you’ll receive coverage for. In most cases, drugs found in lower tiers cost less than those in a higher tier.

Although Medicare drug coverage is offered to members, it’s not a requirement when you enroll in a Medicare health plan during your initial enrollment period. However, if you decide to add drug coverage to your plan after you’ve registered, you’ll most likely be faced with a late enrollment penalty fee.

That’s why it’s recommended that all members include Medicare Part D in their overall benefits plan at initial enrollment. Even if you don’t need prescription coverage now, you won’t have to pay a late enrollment fee in the future if and when you do need prescription coverage.

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How much is Medicare Part D Late Enrollment Penalty?

After the initial enrollment period, Medicare will track how long you’ve gone without prescription drug coverage. If at any time there’s a period of 63 or more consecutive days that you don’t have Medicare drug coverage or any other creditable prescription plan, you may be penalized and charged a fee.

If you incur a late enrollment penalty, the fee will depend on how long you went without adding Part D or creditable prescription drug coverage to your plan. Medicare calculates the fee by multiplying 1% for every number of full uncovered months you went without drug coverage by the national base beneficiary premium (around $32.74 as of 2023). This cost is rounded to the nearest $0.10 and will be added to your monthly Part D premium.

To give you an idea of what the penalty fee may look like, here are a few scenarios to look at:

Months without coverage1% for each month(Multiply)National base beneficiary premium(Equals)TotalRounded to the nearest $0.10
7 months7%X$32.74=2.2918$2.30
15 months15%X$32.74
=4.911$4.90
24 months24%X$32.74=7.8576$7.90

What is creditable coverage?

Creditable coverage refers to any drug coverage plan comparable to the plan offered by Medicare, with expected costs similar to that of a standard Medicare plan. This alternative plan needs to meet a minimum set of requirements and qualifications. The Medicare Modernization Act (MMA) requires companies to notify eligible policyholders if their coverage is credible.

It’s possible to receive creditable coverage from your employer, a union, or the Department of Veterans Affairs. Examples of creditable coverage may include:

  • Tricare or Tricare for Life
  • Coverage from an employer
  • Insurance plans from the marketplace
  • Veterans’ Benefits from the VA
  • Federal Employee Health Benefits Program

Why is there a penalty for late enrollment in Medicare Part D?

Even though Medicare Part D isn’t a requirement for members, Medicare highly encourages policyholders to enroll in drug coverage benefits during the initial enrollment period. The late enrollment penalty is to prevent members from skipping or canceling their Part D coverage.

If you have Medicare drug coverage, you may face a late enrollment penalty and decide to remove it from your plan later. If at any time during the life of your Medicare benefits plan, you don’t have drug coverage for 63 or more consecutive days, you’ll have to pay a penalty.

How long does the Medicare Part D penalty last?

Unfortunately, for those who incur a Part D late enrollment penalty you’ll need to pay this penalty for as long as you have your Medicare drug coverage. That means for each month of your plan, you’ll have an additional late penalty fee added to your monthly premium.

It’s important to note that the national base beneficiary premium will most likely change yearly. You’ll want to keep track of the changes in beneficiary premiums, as this will affect your penalty amount over time.

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