If enrolling in Original Medicare, you may question whether you need Medicare Part D prescription drug coverage. Medicare Part D helps cover the cost of your prescription drugs when you have Medicare. You will pay a monthly premium for Medicare Part D and reap the benefits when picking up medications from the pharmacy.
If you do not take medications or your drug costs without insurance are low, this coverage may feel like an unnecessary expense. However, delaying coverage could leave you responsible for the Medicare Part D late enrollment penalty.
Thus, putting off Medicare prescription drug coverage can be costly, depending on your situation. You may find yourself without insurance to cover medications if you suddenly become ill. Then, when you finally enroll, you may pay a Medicare Part D late enrollment penalty. This results in a higher out-of-pocket expense each month that never goes away and increases the longer you wait.
hat is the Medicare Part D Late Enrollment Penalty?
The Medicare Part D late enrollment penalty is an additional cost on top of your monthly Medicare Part D premium. This extra charge is based on the current year’s average national Medicare Part D premium.
The Medicare Part D penalty is 1% of the average premium for every month you went without creditable drug coverage when first eligible for Medicare. The penalty is in place to encourage beneficiaries to enroll in a Medicare Part D plan if they lack creditable coverage, meaning drug coverage at least as good as a Medicare Part D plan.
When you first become eligible for Medicare, you receive an Initial Enrollment Period to sign up for Original Medicare. Once you have Original Medicare, you are eligible for Medicare Part D.
If you age into Medicare, your Initial Enrollment Period begins on the first day of the month, three months before your 65th birth month. It ends on the last day of the third month after your birth month. If you lack creditable coverage, you must sign up for Medicare prescription drug coverage during this window to avoid the Medicare Part D penalty.
After your Initial Enrollment Period, you will pay the Medicare Part D late penalty if you go without one of these types of drug plans for 63 days or more:
- A Medicare Part D plan
- Prescription coverage through Medicare Part C – a Medicare Advantage Prescription Drug (MAPD) plan
- Another healthcare plan that includes prescription drug coverage that is at least as good as the coverage Medicare provides
Drug plans that are considered creditable include:
- Employer drug coverage
- Union drug coverage
- Group drug coverage
- VA drug coverage
Is There a Medicare Part D Penalty Under 65?
If you qualify for Medicare due to disability but delay Medicare Part D enrollment, you will incur the Medicare Part D penalty when you pick up the drug coverage before 65. To avoid the Medicare Part D penalty, you must be aware of your Medicare eligibility status, know your Medicare Part A effective date, and sign up for Medicare Part D as soon as possible.
Being under 65 will not protect you from Medicare’s late enrollment penalties. If you do not have creditable medical or drug coverage after reaching eligibility, you will need to pay the Medicare Part B and Part D penalties, respectively. So, do not delay your enrollment.
However, when you turn 65, any penalty you incur will be voided, so you will have a clean slate. You will also get a second opportunity to enroll in Medicare Part D to avoid future penalties.
Medicare Part D Late Enrollment Penalty Calculator
The Medicare Part D penalty is based on the number of months you were eligible for Original Medicare without having creditable prescription drug coverage. For each month you go without Medicare Part D or other creditable coverage, you will pay an additional premium of 1% of the current national base beneficiary premium – meaning the average cost of Medicare Part D.
For 2022, the average beneficiary premium is $33.
Additionally, the Medicare Part D penalty is not a one-time penalty. You will pay monthly for as long as you have Medicare prescription coverage. The Medicare Part D penalty is rounded to the nearest 10¢ and added to the premium you pay for your Medicare Part D plan.
Since the Medicare Part D penalty is always based on the current year’s national base premium, it is subject to change or increase each year. The Medicare Part D penalty calculation can be challenging to calculate. So we provide an example to show how it works.
Suppose your Initial Enrollment Period ended, and you waited 24 months to sign up for Medicare Part D. Your Medicare Part D penalty would be 24 percent of the national base premium; one percent for each of the 24 months you waited.
Thus, the calculation is $33 x .24 = $7.90 (rounded to the nearest 10¢).
So, you pay your Medicare Part D premium plus monthly penalty charges. The best way to avoid paying the Medicare Part D penalty is to enroll in a prescription drug plan as soon as you become Medicare-eligible.
Medicare Part D Penalty Appeal
If you are responsible for the Medicare Part D penalty, you can appeal the decision. All you must do is complete a reconsideration request form. This form is available on CMS.gov.
Additionally, if you qualify for Extra Help, you may be eligible for Medicare Part D penalty assistance. Some lower-income beneficiaries have the penalty waived altogether. You can contact Social Security to apply for Medicare Extra Help.
Medicare Part D Penalty FAQs
How to Avoid the Medicare Part D Penalty
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- Part D late enrollment penalty, Medicare. Accessed June 2022.
- 3 ways to avoid the Part D late enrollment penalty, Medicare. Accessed June 2022.