Avoid the Medicare Part D Late Enrollment Penalty

Medicare Part D - also known as the Medicare prescription drug benefit - is an optional U.S. federal-government program with the purpose of helping seniors on Medicare pay for their prescription drugs. Many seniors who choose Original Medicare, purchase a Part D plan in order to get prescription drug benefits while most Medicare Advantage plans include prescription drug benefits. Beneficiaries pay for the popular program through monthly insurance premiums.

Avoid the Medicare Part D late enrollment penalty


The best way to avoid the Part D late enrollment penalty is to understand what it is, why the fee is assessed and what actions you can take to protect yourself. The following Q & A answers the most common questions.


Q. What is the Medicare Part D late enrollment penalty?


A. The Medicare Part D late enrollment penalty - also called the LEP or “penalty”- is a sum that may be tacked onto an enrollee’s monthly Part D premium.


Q. Why is a person charged the Medicare Part D Late Enrollment Penalty?


A. A person on Medicare who is not enrolled in Medicare Part D or other creditable prescription drug coverage* for any period of 63 consecutive days or more after the end their Initial Enrollment Period for Part D coverage may be at risk for the penalty.


*creditable prescription drug coverage, or “creditable coverage”, is prescription drug coverage that on average pays at least as much as Medicare’s standard prescription drug coverage. Examples are plans from an employer, union, Indian Health Service, or the Department of Veterans Affairs. Most plans that offer prescription drug coverage are required to send their members who are eligible for Medicare Part D a notice each year that compares its coverage to Medicare prescription drug coverage and confirms that it is creditable coverage. Some companies include this information in their employee handbook.


Q. How long will I be charged the Medicare Part D late enrollment penalty?


A. In most cases, the LEP is added to the enrollee’s monthly Part D premium for the length of time they have Medicare prescription drug coverage, even if the person changes his or her Medicare drug plan or joins a plan without a monthly premium.


Q. How much is the Medicare Part D late enrollment penalty?


A. The amount of the late enrollment penalty amount changes slightly from year to year and also varies based on how long the enrollee did not have Part D or other creditable prescription drug coverage. The penalty is calculated by multiplying 1% of the national base beneficiary premium ($33.06 in 2021) by the number of full, uncovered months the person did not have Part D or creditable coverage. Then, the monthly premium is rounded to the nearest 10 cents. For 2021, the maximum penalty is up to $695 for the year.


3 actions you can take to avoid the Part D late enrollment penalty


Following these helpful tips from Medicare.gov is the best way to avoid a Medicare Part D late enrollment penalty:


1. Sign up for Medicare prescription drug coverage as soon as you are eligible.


When you sign up for Medicare, you may be in good health and not taking prescription drugs. We understand the temptation to save money by not signing up for a prescription drug plan but we encourage you to consider it anyway. Speak to a Medicare agent about your options – they may be able to find you a plan that fits your needs with little to no monthly premiums.


2. Enroll in Medicare drug coverage as soon as you lose other creditable coverage.


If you lose your creditable drug coverage, it’s a good idea to make a swift transition to Medicare drug coverage. If you go longer than 63 days in a row without creditable coverage, you may be at risk for a penalty when you sign up for Medicare drug coverage later.


3. Keep a record that shows when you had other creditable drug coverage and tell your plan when they ask about it.


If you don’t inform your Medicare plan about your prior creditable prescription drug coverage, you could end up paying a penalty for as long as you have Medicare drug coverage.


Contact a PBC Agent for Help


Our independent insurance agents are dedicated to assisting people on Medicare and those who are ready to transition from employer coverage to personal retirement coverage. We help kupuna understand their benefits options and apply for additional coverage, as needed. Because we represent all the major Medicare Advantage and supplement plans in Hawaii, we are able to offer unbiased advice; all at no cost to our clients.


At PBC, our clients are our number one priority and we look forward to getting to know you and your needs. Call us today at (808) 738-4500 to see how we may be of assistance.

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