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Medicare’s Part D Penalty, Explained

Medicare’s Part D Penalty, Explained

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Originally published November 7, 2016. Expanded and updated September 16, 2021.

If you don’t get a Part D plan when you’re supposed to, the Medicare program will penalize you, and that penalty will last for life.

Penalties can be a bit intimidating – how can you ensure you don’t miss deadlines? And what exactly is the penalty for not signing up with a Part D plan?

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When did the penalty for Part D start?

The Part D penalty started in 2006, the same year the Part D program began.

The Medicare Modernization Act passed in 2003, effective January 1, 2006, established Part D as a voluntary prescription drug benefit program.

And an addition to the Social Security Act – Sec. 1860D-13(b) – signed into law the late enrollment penalty for Part D.

What is the Part D penalty?

The Part D penalty is notoriously confusing – it’s based on something called the “base beneficiary premium,” which changes every year. You’re penalized 1% of that amount for every month you don’t have creditable drug coverage and are eligible for Medicare.  

The base beneficiary premium in 2021 is $33.06, so 1% of that is 33 cents, which is then rounded to the nearest 10 cents. In sum, your Part D late enrollment penalty in 2021 is 30 cents for every month you don’t have creditable drug coverage and are eligible for Medicare.

For example, not having drug coverage for two years would add an additional $7.20 to your drug plan premium for life.

What is the Part D penalty in Illinois?

A common misconception is that the Part D late enrollment penalty is different in every state. However, it’s not!

The Part D penalty is the same in Illinois as is it is in all states.

For every month you go without drug coverage, you’ll incur a 30-cent premium penalty (as of 2021), regardless of which state you’re in. The penalty is based on the national base beneficiary premium. That penalty could change from year-to-year as the national base beneficiary premium fluctuates.

Medicare Part D penalty exceptions

If you’re eligible for Part D but have other “creditable” drug coverage, you don’t have to worry about the penalty. Examples of creditable drug coverage include:

  • Drug coverage under an MAPD plan
  • Drug coverage under a Medicaid plan
  • Drug coverage under a Group Health plan
  • Drug coverage under a State pharmaceutical assistance program
  • Drug coverage for veterans

However, if you’re eligible for Part D and decide to go without, you’ll start racking up the penalties. The longer you go without drug coverage, the higher your penalty will be.

How long does the Part D penalty last?

Any Part D penalties you’ve racked up last for life. In our earlier example, if you went 2 years, or 24 months, without drug coverage when you could’ve had it, you’d have an $7.20 additional premium for future drug coverage.

In other words, you’d have to pay you Part D premium + $7.20 for the rest of your life. You cannot get rid of the Part D penalty.

What is the maximum Part D penalty?

There is no maximum Part D penalty. Medicare has not signed into law any caps for Part D late enrollment penalties.

The most someone could pay in Part D penalties would be just under an additional $60 per month, and that’s if they were eligible for Part D coverage in 2006 and just got drug coverage for the first time in 2021.

What is the Part D penalty for 2021?

Each month you go without creditable drug coverage in 2021 will cost you 30 cents in additional premium. For example, if you were eligible for Part D drug coverage and chose to go without for 12 months, you’d rack up $3.60 of premium penalty in 2021.

In the future, you’d pay your Part D premium + $3.60 per month.

Do I need Medicare Part D if I don’t take any drugs?

If you don’t take any drugs or have generic prescriptions, you may decide you don’t want to pay a premium for a Part D plan.

However, the longer you go without a Part D plan, the higher your future penalty will be.

We advise enrolling in the lowest premium drug plan to avoid the late enrollment penalty and ensure you have drug coverage. You never know – you may be prescribed an expensive medication throughout the year, and your drug plan could be a huge help!

Plus, there are drug plans available in Macon County, Illinois for less than $10 per month.

Medicare Part D penalty calculator for 2021

To avoid any manual math, you can use a Medicare Part D penalty calculator. We often utilize a Part D calculator from Amplicare. Enter your birthday, and the calculator will tell you your Part D late enrollment penalty.

For example, if I was born in July 1949, my Part D penalty would be $27.20 per month for 83 months without coverage.

How can I avoid the Part D penalty?

You can avoid the Part D late enrollment penalty entirely by enrolling on time. If you do this within three months before or after you turn 65, you don’t need to worry about a late payment fine for a Medicare Part D prescription drug plan.  

Similarly, if you enroll within two months of the time you lose your previous prescription drug plan, you will not be subject to a penalty. If you miss your Initial Open Enrollment window when turning 65 or enrolling in Medicare Part B, you'll have to wait until the next Annual Enrollment Period, which takes place from October 15-December 7.

Conclusion

Ultimately, you have control over whether you owe a late enrollment penalty for your Part D coverage. Enroll before the penalty would begin, and you can save money on your premium costs.

Our team here at Sams/Hockaday can help you with Medicare enrollment deadlines and selecting the most competitive plan for you. Just give us a call or schedule your appointment online to get started!

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