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It’s important to sign up for a Medicare Part D prescription drug plan when you enroll in Original Medicare or Medicare Advantage. If you wait too long and sign up later, you’ll face a late enrollment penalty that permanently increases your Part D premiums.
The penalty also applies if you drop your Medicare Part D plan and go without prescription drug coverage for too long.
Here’s what you need to know about the Medicare Part D late enrollment penalty and how to avoid it.
Who has to pay the Medicare Part D late enrollment penalty?
You’ll start to owe a late enrollment penalty if you go at least 63 days without sufficient prescription drug coverage after the end of your initial Medicare enrollment period (when you’re first eligible for Medicare).
The initial enrollment period lasts for seven months around your 65th birthday: the three months before your birthday month, your birthday month and the three months after.
» MORE: When does Medicare start?
Your best bet to avoid the penalty is to sign up for Medicare Part D or a Medicare Advantage plan with prescription drug coverage during your initial enrollment period and stay enrolled consistently afterward.
How much is the Medicare Part D late enrollment penalty?
Your Medicare Part D late enrollment penalty gets higher the longer you go without Medicare Part D or other creditable prescription drug coverage.
The penalty is calculated in part based on the national base beneficiary premium for Medicare Part D: $33.37 per month in 2022 ($32.74 in 2023).
The Medicare Part D late enrollment penalty is 1% of that national base beneficiary premium for each full month that you didn’t have Medicare Part D or other creditable prescription drug coverage, rounded to the nearest 10 cents.
If you weren’t covered for two years, for example, that’s 24 months. So you would owe 24% of $33.37, or $8, each month for 2022, in addition to your premiums for either your Medicare Part D plan or Medicare Advantage plan with prescription drug coverage.
How long does the Medicare Part D late enrollment penalty last?
It’s permanent. You’ll continue to owe the penalty with your premiums if you have Medicare Part D or a Medicare Advantage plan with prescription drug coverage.
Because the penalty is tied to the national base beneficiary premium, it can change yearly. So even if you don’t go without Part D coverage again after you incur the penalty, your penalty amount could go up as the national base beneficiary premium rises.
What is creditable prescription drug coverage?
If you wait to sign up for Medicare Part D because you already have equivalent or better prescription drug insurance, such as coverage from an employer or a union, you won’t owe the Part D late enrollment penalty.
For that other insurance to count, your non-Medicare prescription drug coverage has to qualify as “creditable prescription drug coverage” because it pays for at least as much as Medicare’s standard prescription drug coverage, on average.
You don’t need to do the math to determine whether your non-Medicare prescription drug coverage qualifies. Plans must tell you every year whether or not your coverage counts as creditable prescription drug coverage.
Hang on to documentation from your non-Medicare coverage in case you need to prove that you had creditable coverage when it comes time to sign up for Medicare Part D or if you’re erroneously charged a late enrollment penalty.
If you have additional questions about Medicare, visit Medicare.gov or call 800-MEDICARE (800-633-4227, TTY 877-486-2048).