MHI – Q: How big is the Part D late enrollment penalty?

A: If you wait to sign up on a Part D drug plan until you actually need one - as opposed to when you first become eligible at age 65 - you’ll pay a late enrollment penalty for every month you could have been enrolled in a drug plan but you failed to do so. Only people who have prescription insurance that pays as well as a standard Part D plan (that’s called creditable coverage) are excused from paying this penalty. The penalty is ongoing; it lasts for the rest of your life.

To estimate your late enrollment penalty, count the number of months you were without creditable drug coverage. Multiply that number by the annual national base Part D premium ($35.02 in 2018). Then multiply by 1% and round off to the nearest ten cents. 

Let’s say you are signing up during this year’s Open Enrollment Period for coverage to start January 1, 2018. We’ll say you were five years late: 60 months x $35.02 x .01 = $21.01. Rounded to the nearest ten cents, your penalty would be $21.00 per month.

That’s just your penalty. You still have to pay the plan premium as well as any deductible and copays that apply. As if that’s not bad enough, your penalty will be recalculated every time there is a change in the national base Part D premium.

Do you see why it makes sense to consider signing up for a drug plan at 65 even if you don’t take any medications?