Medicare Part D Late Enrollment Penalty 2021 (With Examples)
Learn how the Part D late penalty works and when it’s applied.
What Is the Medicare Part D Late Enrollment Penalty?
The late enrollment penalty for Medicare Part D is an extra amount added to your Part D monthly premium. Generally, the longer you wait to enroll in Part D past your Initial Enrollment Period, the greater your Part D penalty amount.
The penalty amount is calculated by multiplying 1% of the National Base Beneficiary Premium times the number of months you went without creditable prescription drug coverage. The months used in calculating the penalty must be full months that you went with out creditable coverage.
The final penalty amount is always rounded to the nearest $.10 and then added to the cost of your Part D monthly premium.
What Is the National Base Beneficiary Premium for 2021?
The National Base Beneficiary Premium is used in calculating the Medicare Part D late enrollment penalty. Its specific amount can change from year to year. Therefore, it’s important to note that your Part D late enrollment penalty can also change in amount from year to year. For 2021, the National Base Beneficiary Premium is $33.06. This amount has decreased from the 2020 amount, which was $32.74.
Who Is Affected by the Medicare Part D Late Enrollment Penalty?
The Part D late enrollment penalty only applies if you have gone without prescription drug coverage for a period of 63 days or more once eligible for Medicare.
So, once your Initial Enrollment Period has ended, you’ll be assessed a late enrollment penalty when enrolling in Part D if you have gone for a consecutive 63 days or more without one of the following types of coverage:
Medicare Prescription Drug Plan (Part D)
Medicare Advantage Plan (Part C)
Creditable prescription drug coverage
Note: If you receive Extra Help to pay for your Medicare coverage, you will not be subject to a Part D late enrollment penalty.
How Does a Late Penalty Affect My Part D Premium?
Once you join a Medicare Part D prescription drug plan, your plan provider will notify you if you have been assessed a late penalty. This Part D penalty applies for as long as you have a Medicare prescription drug plan.
The amount of the penalty is determined by how long you went without prescription drug coverage. The late penalty is 1% of the national base beneficiary premium ($33.06) times the number of full months you went without creditable drug coverage.
Part D Late Enrollment Penalty Example 1:
So, let’s take a look at an example of how the Part D late enrollment penalty is applied. Say that your Medicare Initial Enrollment Period came to a close at the end of June in 2018 and you did not join Part D or have any other source of creditable drug coverage.
Instead, you waited until the following year (2019) to join during the Open Enrollment Period. This means that your drug coverage took effect January 1st of 2020, and therefore results in a Part D late enrollment penalty of $5.90.
Breakdown:
18 months without coverage (July 2018 – December 2019)
1% for each month without coverage (1% x 18 = 18%)
18% times the 2020 national base beneficiary premium of $32.74
$5.89 rounded to the nearest $.10 = $5.90.
Example 1 Continued:
Because the national base beneficiary premium tends to change from year to year, your 2021 Part D late enrollment penalty will change in amount from your 2020 penalty.
Medicare recalculates your penalty using the same count of months without coverage while swapping in the new 2021 national base beneficiary premium of $33.06. So, your Part D late enrollment penalty for 2021 is now $6.00.
Breakdown:
18 months without coverage (July 2018 – December 2019)
1% for each month without coverage (1% x 18 = 18%)
18% times the 2021 national base beneficiary premium of $33.06
$5.95 rounded to the nearest $.10 = $6.00
Part D Late Enrollment Penalty Example 2:
Let’s take a look at another example. Say that your Initial Enrollment Period came to a close at the end of March in 2018 and you did not join Part D or have any other source of creditable drug coverage.
Instead, you waited to enroll in Part D during the 2020 Open Enrollment Period, meaning that your coverage will take effect on January 1, 2021. In this case, your Part D late enrollment penalty is $10.90.
Breakdown:
33 months without coverage (April 2018 – December 2020)
1% for each month without coverage (1% x 33 = 33%)
33% times the 2021 national base beneficiary premium of $33.06
$10.91 rounded to the nearest $.10 = $10.90
Important Note: Be sure to keep any records you receive that detail your creditable prescription drug coverage. When you go to enroll in your new plan, the provider will check to ensure you did not have any gaps in coverage of 63 days or more.
In the event there is a dispute over coverage dates, you can share your records with your plan provider to confirm your previous coverage.
Helpful Resources:
Medicare: Part D Late Enrollment Penalty
Medicare: 3 Ways to Avoid the Part D Late Penalty
