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 drug coverage (like VA benefits or employer healthcare benefits), you could be subject to a penalty that is added to your monthly Medicare Part D premiums should you ever decide to join a Medicare drug plan in the future.

The Medicare Part D late-enrollment premium penalty is calculated as a premium increase of 1% of the annual base Part D premium (for example, $36.78 in 2025) for every month you have been without creditable drug coverage - so each month without drug coverage accumulates a 2025 penalty of 1 month * 1% * $36.78 = $0.3678.

Please note:  The Medicare Part D penalty is permanent and will fluctuate every year based on the national average base Medicare Part D premium.

The exact amount of your Part D late-enrollment premium penalty is re-calculated each year by the Centers for Medicare and Medicaid Services (CMS) and then reported by CMS to your Part D plan.  Your Medicare Part D plan will then send you a letter regarding the amount of your penalty.  The letter from your Part D plan will also detail how the penalty was calculated and explains how you can ask for a review of your Late Enrollment Penalty (LEP) - should you feel it was calculated incorrectly.  Click here for a few more details on the late enrollment penalty.

Example Penalty Calculation

If you turned 65 (or became eligible for Medicare) in January 10, 2021, your Medicare Part D Initial Enrollment Period (IEP) would extend 3 months beyond your birthday month or until April 2021.  This means that, if you do not enroll in a Medicare Part D plan during the Initial Enrollment Period, your penalty would start accumulating in May 2021 and continue until you actually join a Medicare Part D plan or obtain some other form of creditable prescription drug coverage (or are exempt due to your low income status, such as qualifying for Medicaid or the Medicare Part D Extra Help program).

To continue with the example, if you never had Medicare Part D coverage - and were first eligible for Medicare on January 10, 2021 - and you enroll in a 2025 Medicare Part D plan starting January 1, 2025, your 2025 late-enrollment penalty may be as high as $16.20 per month paid in addition to your monthly Medicare Part D premium (May 2021 through December 2024 = 44 months * 1% of $36.78, the 2025 base Medicare Part D premium).

Another example provided by the Centers for Medicare and Medicaid Services (CMS)

Mrs. Martinez is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2012. She doesn’t have prescription drug coverage from any other source. She didn’t join by May 31, 2012, and instead joined during the Open Enrollment Period that ended December 7, 2014. Her drug coverage was effective January 1, 2015.

2015
Since Mrs. Martinez was without creditable prescription drug coverage from June 2012 through December 2014 [31 months without drug coverage], her penalty in 2015 was 31% (1% for each of the 31 months) of $33.13 (the national base beneficiary premium for 2015) or $10.27. Since the monthly penalty is always rounded to the nearest $0.10, she paid $10.30 each month in addition to her plan’s monthly premium in 2015.

Here’s the math for the 2015 penalty:
.31 (31% penalty) x $33.13 (2015 base beneficiary premium) = $10.27
$10.27 rounded to the nearest $0.10 = $10.30
$10.30 = Mrs. Martinez’s late enrollment penalty for 2015

2025
In 2025, Medicare recalculated Mrs. Martinez’s penalty using the 2025 base beneficiary premium ($36.78).  Therefore, Mrs. Martinez’s new monthly penalty in 2025 is 31% of $36.78 or $11.4018 each month. Since the monthly penalty is always rounded to the nearest $0.10, she’ll pay $11.40 each month in addition to her plan’s monthly premium.

Here’s the math for the 2025 penalty:
31 months x $0.3678 (2025 base beneficiary premium is $36.78) = $11.4018
$11.4018 rounded to the nearest $0.10 = $11.40
$11.40 = Mrs. Martinez's monthly late enrollment penalty for 2025.

(source: Medicare, with emphasis, clarification and examples)

Question:  I enrolled in a Part D drug plan when I was first eligible for Medicare, but then cancelled my drug plan.  Would I have a penalty if I decide to rejoin a Medicare drug plan in the future?

Probably.  If you canceled your Medicare Part D plan or were without creditable prescription drug coverage for more than 63 days, you also may be subject to the late-enrollment penalty - should you ever decide to join a Medicare drug plan in the future - and you don't have any other creditable drug coverage - and you are not eligible for the Medicare Part D Extra Help.

For a further explanation of the late-enrollment penalty, please see our Frequently Asked Question:
How do I calculate my Medicare Part D Late-Enrollment Penalty?

Too see a few examples of how to calculate a late enrollment penalty you can click here for the Calculating the Late Enrollment Penalty article. or see our most recent articles on the Late-Enrollment Premium Penalty: q1medicare.com/news/category/ late-enrollment-penalty-lep/11/

Appealing the late-enrollment penalty
Please note: In certain situations, you can appeal your late-enrollment penalty.

No penalty for Extra Help eligible Medicare beneficiaries
Remember, not everyone is subject to the late-enrollment penalty. CMS provides that there will be no late-enrollment penalty "for any beneficiary eligible for the low income subsidy" or Extra Help program.

Question:  Any chance of repealing the Medicare Part D late-enrollment penalty?

Probably not.  Back in 2005 and 2006, some people thought that the Medicare Pare D late-enrollment premium penalty would go away or would not be enforced or be repealed as unfair to seniors who had not learned about the Medicare Part D program.

Unfortunately, the late-enrollment penalty did not go away and some Medicare beneficiaries who did not join a Medicare Part D plan when they were first eligible or who were without creditable prescription coverage for more than 63 days are now beginning to join Medicare Part D plans, and then receiving letters from their new Part D plans about how their penalty will increase (or more than double) their monthly premiums.