The late enrollment penalty is an amount added to your Medicare Part D premium. You may owe a late enrollment penalty if, at any time after your initial enrollment period is over, there's a period of 63 or more days in a row when you don't have Part D or other creditable prescription drug coverage. Learn how to avoid the late enrollment penalty.
If you get Extra Help, you don't pay the late enrollment penalty.
How much is the Part D penalty?
The cost of the late enrollment penalty depends on how long you went without creditable prescription drug coverage.
The late enrollment penalty is calculated by multiplying 1% of the "national base beneficiary premium" ($32.42 in 2014, and $33.13 in 2015) times the number of full, uncovered months you were eligible but didn't join a Medicare Prescription Drug Plan and went without other creditable prescription drug coverage. The final amount is rounded to the nearest $.10 and added to your monthly premium.
The national base beneficiary premium may increase each year, so the penalty amount may also increase each year.
Your plan will tell you if you owe a penalty
After you join a Medicare drug plan, the plan will tell you if you owe a penalty, and what your premium will be. You may have to pay this penalty for as long as you have a Medicare drug plan. If you had to pay a Part D late enrollment penalty before you turned 65, the penalty will be waived once you reach 65.
Mrs. Martin didn't join a drug plan when she was first eligible—by June 2011. She doesn't have prescription drug coverage from any other source. She joined a Medicare drug plan during the 2013 Open Enrollment Period, and her coverage began on January 1, 2014.
Since Mrs. Martin was without creditable prescription drug coverage from July 2011–December 2013, her penalty in 2014 is 30% (1% for each of the 30 months) of $32.42 (the national base beneficiary premium for 2014), which is $9.73. The monthly penalty is rounded to the nearest $.10, so she'll be charged $9.70 each month in addition to her plan's monthly premium in 2014.
Here's the math:
.30 (30% penalty) × $32.42 (2014 base beneficiary premium) = $9.73
$9.73 (rounded to the nearest $0.10) = $9.70
$9.70 = Mrs. Martin's monthly late enrollment penalty for 2014