The Centers for Medicare and Medicaid Services (Medicare or CMS) is the only entity authorized to
calculate the amount of a beneficiary’s
late-enrollment penalty (LEP).
The LEP is assessed as 1% of the national base beneficiary premium for the coverage year times the total number of uncovered months, regardless of the year(s) in which those months occurred.
Note: The national base beneficiary premium used in the calculation of the LEP is
not the part D plan sponsor’s premium. It is a national amount that is a function of the national average bid for the year in which the beneficiary is enrolled in a Part D plan sponsor [see Link below for the value of the National Base Beneficiary Premium].
Therefore, even if there is no change in the number of uncovered months, the LEP may change each year because it is recalculated using the total number of uncovered months and the national base beneficiary premium for that particular year.
The LEP amount is rounded to the nearest ten cents.
Example:
Mr. Jones enrolled in Plan XYZ effective January 1, 2009. Plan XYZ determined that Mr. Jones had a gap in creditable prescription drug coverage following the end of his Part D IEP [Initial Enrollment Period - when you first become eligible for Part D coverage]. Therefore, Plan XYZ reported 5 uncovered months. Although Mr. Jones had uncovered months in 2008, CMS calculated the 5 uncovered months based on the 2009 national base beneficiary premium for the coverage year 2009 which is $30.36 and arrived at the amount of $1.518 [sic, .05 x. 30.36 = 1.518]. CMS rounded this amount to the nearest ten cents and informed Plan XYZ that Mr. Jones’ Part D LEP amount is $1.50.
(source: Section 40.1 of MEDICARE PRESCRIPTION DRUG BENEFIT MANUAL – CHAPTER 4)
See also our Late-Enrollment Penalty article with the National Base Beneficiary Premium:
2024 Medicare Part D Late-Enrollment Penalty rate will increase 6% - with maximum penalties reaching up to $878 for the year.