What is the Part D late enrollment penalty?
About 1 percent of a national base premium for every month you went without, added permanently. Here is how it is calculated and how to fight it.
The Part D penalty is separate from the Part B penalty, calculated differently, and just as permanent.
The calculation
Roughly 1 percent of a national base beneficiary premium for each full month you went without creditable drug coverage after becoming eligible.
Two things make it worse than it first sounds.
- It is recalculated every year against the current national base figure, so it grows as that figure grows.
- It follows you between plans. Switching to a cheaper plan does not shed it.
A three year gap is roughly a 36 percent surcharge on your drug plan premium, every month, for the rest of your life.
When the clock runs
It starts after your Initial Enrollment Period ends, and it counts full months without creditable coverage. A gap of fewer than 63 consecutive days does not trigger it, which gives you a short buffer when changing plans.
That 63 day buffer is worth knowing when you leave employer coverage. Do not use all of it.
What creditable coverage means
Coverage at least as good as standard Part D. Your employer, union or retiree plan must send you a notice each year saying whether it qualifies.
- VA prescription benefits are creditable
- TRICARE is creditable
- Most employer group drug plans are creditable, but you should confirm rather than assume
- Marketplace coverage after Medicare eligibility does not protect you
- COBRA drug coverage may or may not be creditable. Check the notice
Keep every one of those notices in one folder. See creditable coverage explained.
The mismatch that catches people
When employer coverage ends, you get eight months to enroll in Part B without penalty but only two months for Part D.
People handle Part B carefully, feel they have plenty of time, and walk straight into a drug penalty. Handle both in the same sitting. See applying after 65.
Two months, not eight. This single mismatch is responsible for more avoidable Part D penalties than anything else.
Appealing a penalty
Penalties do get applied in error, usually because there is no record of coverage you actually had.
- You will receive a notice stating the penalty and giving you a chance to respond.
- Send the creditable coverage notices from the years in question.
- If you do not have them, ask your former employer, plan administrator or carrier for a letter documenting your coverage dates. Most will provide one.
- Respond within the deadline on the notice. Missing it makes this much harder.
There is also relief in narrow circumstances if you were given incorrect information by a federal employee or a plan representative.
If you qualify for Extra Help
The late enrollment penalty is waived for people receiving Extra Help. If your income is limited, applying may eliminate the penalty entirely along with most of your drug costs.
See Extra Help and the Part B penalty.
Common follow-up questions
Does the Part D penalty ever go away?
Not on its own. It lasts as long as you have Part D. It is waived if you qualify for Extra Help.
I switched plans. Does the penalty reset?
No. It follows you from plan to plan and is recalculated annually against the national base premium.
How long a gap is allowed?
Fewer than 63 consecutive days without creditable coverage does not trigger a penalty. Do not plan around the edge of that.
Want this looked at properly?
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