What is the Part D late enrollment penalty?

People who don’t join a Medicare drug plan when they are first eligible for Medicare Part A (Hospital Insurance) and/or Medicare Part B (Medical Insurance), and who go without creditable prescription drug coverage for 63 days or more, may have to pay a late enrollment penalty to join a Medicare prescription drug plan later. Creditable prescription drug coverage means coverage that is expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. The late enrollment penalty amount changes every year. The person will have to pay it each month as long as he or she has Medicare prescription drug coverage.


How is a person’s late enrollment penalty calculated?

A person’s late enrollment penalty is calculated when he or she first joins a Medicare drug plan.  Currently, the late enrollment penalty amount is 1% of the “national base beneficiary premium” for each full, uncovered month that the person was eligible to join a Medicare drug plan and didn’t. The monthly penalty is rounded to the nearest $.10. The national base beneficiary premium for 2009 is $30.36.

[Please note the following annual changes]:

The Part D base beneficiary premium for 2006 was $32.20
The Part D base beneficiary premium for 2007 was $27.35
The Part D base beneficiary premium for 2008 was $27.93
The Part D base beneficiary premium for 2009 was $30.36
The Part D base beneficiary premium for 2010 was $31.94
The Part D base beneficiary premium for 2011 was $32.34
The Part D base beneficiary premium for 2012 was $31.08
The Part D base beneficiary premium for 2013 was $31.17

Example 1
Mrs. Smith is currently eligible for Medicare, and her initial enrollment period ended on May 15, 2006. She has never had creditable prescription drug coverage from any other source. She didn’t enroll by May 15, 2006. Instead, she enrolled when she was next eligible to join (the fall annual enrollment period between November 15–December 31, 2006). Her drug coverage was effective January 1, 2007. In 2007, the national base beneficiary premium was $27.35. Since Mrs. Smith was without creditable prescription drug coverage from June through December 2006, her penalty in 2007 was 7% of $27.35 (1% for each of the 7 months from June through December) or $1.91. The monthly penalty was rounded to the nearest $.10, so she was charged $1.90 each month in addition to her plan’s monthly premium in 2007.

Each year, Mrs. Smith’s penalty will change since the current year’s national base beneficiary premium is used to recalculate the penalty. In 2009, Mrs. Smith will pay 7% of $30.36 or$2.13. This amount is rounded to the nearest $.10, so she will be charged $2.10 each month in addition to her plan’s monthly premium in 2009.


Example 2
Mr. Ray doesn’t have creditable prescription drug coverage. His initial enrollment period ended on May 15, 2006. He waited to join a Medicare drug plan until December 2008. His coverage was effective January 1, 2009. He wasn’t enrolled for 7 months in 2006 (June through December), all 12 months in 2007, and all 12 months in 2008. In 2009, he will have to pay 31% (1% for each full, uncovered month that he was eligible to enroll in a Medicare drug plan but didn’t) of the national base beneficiary premium for 2009 ($30.36). Mr. Ray will be charged $9.40 ($9.41rounded to the nearest $.10) each month in addition to his plan’s monthly premium. This amount will change each year when the national base beneficiary premium changes.


Do some people have a special opportunity to join a Medicare drug plan without having to pay a late enrollment penalty?

Yes. Certain people who qualify for extra help under Part D may enroll in a Medicare prescription drug plan with no penalty. Once they enroll in a Medicare drug plan, they won’t be charged a late enrollment penalty as long as they stay continuously enrolled in a Medicare drug plan. However, if they disenroll from their Medicare drug plan, and don’t have creditable prescription drug coverage for a continuous period of 63 days or more, they may later be charged a late enrollment penalty if they join a Medicare drug plan.

Also, Medicare won’t collect a late enrollment penalty for certain people affected by Hurricane Katrina who enrolled in a Medicare drug plan in 2006. As long as they stay continuously enrolled in a Medicare drug plan, they won’t be charged a late enrollment penalty. However, if they disenroll from their Medicare drug plan, and don’t have creditable prescription drug coverage for a continuous period of 63 days or more, they may be charged a late enrollment penalty if they join another Medicare drug plan.


Will someone who didn’t enroll in a plan until one month after he or she was first eligible to join have a penalty?

No. A person must be without creditable prescription drug coverage for a continuous period of 63 days or more after their initial enrollment period to have a late enrollment penalty. But, after the initial enrollment period, most people won’t have another opportunity to enroll in a Medicare drug plan until November 15–December 31 each year [prior to 2011 when the enrollment period dates will change], with their coverage effective January 1 of the following year.


Are there some situations when a person could enroll in a Medicare drug plan other than November 15 – December 31each year?

Yes. In certain situations, people with Medicare may be eligible for a Special Enrollment Period (SEP) that allows them to make changes to their Medicare drug coverage outside of general enrollment periods (like if the person moves out of the service area or lives in a nursing home).  However, even if the person enrolls during an SEP, they may still owe a penalty. For more information about general and special enrollment periods, visit www.cms.hhs.gov/ partnerships/ downloads/ 11219_P.pdf to view the tip sheet “Information Partners Can Use on: Understanding Medicare Enrollment Periods” (CMS Publication No. 11219-P).


Example 3
Mrs. Jones moved into a nursing home and, therefore, had a special opportunity to enroll in a Medicare drug plan for coverage effective October 1, 2007. However, she didn’t have creditable prescription drug coverage for the months February through September 2007 and had to pay a late enrollment penalty. Since the national base beneficiary premium in 2007 was $27.35, her penalty in 2007 was $2.20 per month (or 8% of $27.35, rounded to the nearest $.10). Each year, the current year’s national base beneficiary premium is used to recalculate the penalty.  In 2009, Mrs. Jones will pay $2.40 per month (8% of $30.36, rounded to the nearest $.10). She will pay this penalty in addition to her plan premium each month.

[highlighting and updated premium information added]

TIP SHEET
Information Partners Can Use on:
Calculating the Late Enrollment Penalty
Medicare Prescription Drug Coverage As of April 2009
CMS Publication No. 11222-P

(Updated Monday 11.11.2011)
See Late Enrollment Penalty (LEP) Calculation TIP Sheets from other years in our FAQ:
How do I calculate my Medicare Part D Late Enrollment Penalty?
2011 Revision