If you did not enroll into a Medicare Part D prescription drug plan during your initial enrollment period (IEP) and you did not have other creditable prescription coverage (like VA or employer benefits), you could be subject to a penalty that is added to your monthly Part D premiums. In addition, if you canceled your Medicare Part D plan and were without creditable prescription drug coverage for more than 63 days, you will also be subject to the premium penalty.
The Premium Penalty is calculated as an increased monthly premium of an additional 1% of the average annual Part D premium for every month that you were without creditable coverage.
Back in 2006, some people thought that the premium penalty would go away or would not be enforced. In fact, the Late Enrollment or Premium Penalty did not go away and some Medicare beneficiaries who did not join a Medicare Part D plan when they were eligible or who were without creditable prescription coverage for more than 63 days are beginning to receive letters from their new Part D plans about how their penalty will increase their monthly premiums.
The exact amount of the Part D late-enrollment premium penalty is calculated by the Centers for Medicare and Medicaid Services (CMS) and then reported by CMS to your Part D plan. Your Part D plan will then send you a letter regarding the amount of your penalty. I The letter from your Part D plan will also detail how the penalty was calculated and explain how you can ask for a review of your the Late Enrollment Penalty (or LEP). Click here for a few more details on the late enrollment penalty.