Medicare Drug Coverage Penalty: How the Part D Penalty For Not Enrolling Works
If you’re aging into Medicare soon, you'll want to understand how the Part D prescription drug coverage penalty works. While you aren’t required to have a drug plan, you are penalized for each and every month that you go without it.
The way the Part D penalty is calculated is sort of confusing (thanks a lot, Medicare!), but we have plenty of examples so that you can understand how to calculate it for yourself.
Rest assured that you can contact us at any time if you’d like us to calculate your Part D penalty for you. That’s what we’re here for!
What Is the Medicare Part D Penalty?
For starters, Medicare Part D, also called your prescription drug plan, is a health insurance plan that helps pay for prescriptions.
If you’re eligible for Medicare Part D, but you choose not to sign up for it, you start getting penalized.
This is only if you’re eligible for Part D, and you don’t have any other type of prescription drug coverage. For example, if you’re not retired yet, and your employer’s health plan has drug coverage, you won’t be facing any penalties.
The Part D penalty continues to go up over time; however, you will not receive the penalty in the form of a bill in the mail – you receive the penalty in the form of a higher premium later on.
The longer you go without Part D drug coverage, the more expensive that coverage will be later on.
Calculate My Part D Penalty
In order to calculate your Part D penalty, you need to know two things:
- How many months you’ve gone without coverage, and
- The national base beneficiary premium for the current year.
The national base beneficiary premium for 2019 is $33.19 (a little less than it was in 2018, actually!). It can change every year, though, so be sure to check that figure for the current year.
For each month that you don’t have prescription drug coverage, you’re penalized 1% of that national base beneficiary premium.
The final sum is then added on to your monthly Part D premium, meaning that the more months you’ve gone without coverage, the more expensive your drug plan will eventually be.
If you’re calculating your penalty for this year (2019), you’d be penalized 33 cents for 1 month of no drug coverage.
So, let’s say you didn’t have drug coverage for 2 years. That’s 24 months, which means you’d be penalized 24% of the national beneficiary premium that year (1% for each month). In 2019, that would equal a total of $7.97 ($33.19 x .24 = $7.97).
This means that you’d pay an extra $7.97 per month (in addition to your regular Part D monthly premium) for the rest of your life.
Medicare Part D Penalty For Late Enrollment
If you’re looking for a Part D penalty calculator, all you need to do is fill in the blanks to this equation:
The national base beneficiary premium for the current year x the number of months you haven’t had drug coverage, and put a decimal in front of it = the monthly penalty added to your Part D drug plan
If you’re not good with equations, don’t worry. We have three examples to help you understand how this Part D penalty formula works. Once you see the examples, it’ll make more sense.
Part D Penalty Example #1
Let's say that it’s currently May of 2019. You haven’t had prescription drug coverage since December of 2017. That means you haven’t had drug coverage for a total of 16 months.
It’s 2019, and the national base beneficiary premium is $33.19.
So, here’s your Part D penalty calculation:
$33.19 x .16 = $5.31
Part D Penalty Example #2
Here’s another example.
Let's say it’s currently September of 2019. You forgot to sign up for a Part D plan in May, so it’s been 4 months since you’ve had creditable drug coverage.
Here’s your Part D penalty calculation:
$33.19 x .04 = $1.33
Part D Penalty Example #3
One more example just to make sure you’re golden!
Let's say it’s currently August of 2019. You decided not to get Medicare Part when you turned 65, which was in February of 2010. That means you haven’t had Part D drug coverage for 114 months.
Here’s your Part D penalty calculation:
$33.19 x 1.14 = $37.84
In all of these examples, your final calculation should be rounded to the nearest 10 cents. This is the fee you’ll have to pay in addition to your regular Part D premium each month. This fee does not go away for the life of the policy.
So, if you end up choosing a Part D drug plan that costs $40 per month, and we’re using the final example, your monthly bill would actually be $40 + $39.90, or $79.90 per month.
Do I Have a Part D Penalty?
If you’re unsure about whether you will end up owing a penalty, you can contact us at any time.
Also, when you do sign up for a Part D plan, that plan will tell you if you owe a penalty. You will also know what your total monthly premium will be.
Avoiding the Medicare Part D Penalty
In order to avoid the Medicare Part D penalty, don’t go without creditable drug coverage.
Here’s what we recommend:
- Join a Part D plan when you’re first eligible. For most people, this is when they turn 65, and even if you don't have any ongoing prescriptions, these plans are really inexpensive (sometimes as low as $20 or less per month). However, your agent – or one of our experts here at Medicare Allies – can confirm that for you.
- Don’t go over 60 days without a drug plan – this could be Part D or some other type of creditable drug plan (through your employer, for example).
If you need help with your drug plan, feel free to use the DIY Part D tutorial, or you can contact us to get help from one of our trusted advisors.
We’re always available to answer your questions. All you have to do is reach out!
How to Compare Drug Plan Costs
Comparing drug plan costs can seem challenging, but the Medicare Part D Cheat Sheet gives you the power to do it on your own.Download Your Cheat Sheet Now
Our team of dedicated, licensed agents can help you as little or as much as you need. Whether it’s answering a few questions about Medicare or creating a comprehensive Medicare Planner with you, we are your Medicare Allies.