Medicare Part D Penalty: What it is and How it is Calculated
Medicare Part D is a prescription drug program that provides coverage for seniors and people with disabilities who are enrolled in Medicare. However, if you do not enroll in a Part D plan when you are first eligible, you may face a Medicare Part D penalty.
What is Medicare Part D Prescription Drug Penalty?
The Medicare Part D penalty, also known as the late enrollment penalty, is a fee that is added to your monthly premium if you did not enroll in a Part D plan when you were first eligible. The penalty is calculated based on the number of months that a person did not have creditable prescription drug coverage after becoming eligible for Medicare Part D.
To determine the penalty amount, 1% of the "national base beneficiary premium" ($32.74 in 2023) for Medicare Part D is multiplied by the number of full, uncovered months that the person was eligible for but did not enroll in a Medicare Part D plan or creditable prescription drug coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium. The "national base beneficiary premium" is the average monthly premium for a Medicare Part D plan as determined by the Centers for Medicare and Medicaid Services (CMS). The national base premium may change each year, so your penalty amount may also change each year.
The resulting amount is a lifetime penalty and added to the person's Medicare Part D premium each month for as long as they have a Part D plan. Not everyone will be subject to the Part D penalty, as those who have creditable prescription drug coverage through an employer or union plan, for example, may be exempt from the penalty, as well as those beneficiaries that qualify for Low Income Subsidy (LIS).
John became eligible for Medicare Part D on January 1, 2021, but did not enroll in a plan until January 1, 2023. This means he went without prescription drug coverage for 24 months.
To calculate John's Part D penalty:
1% of the national base beneficiary premium ($32.74 in 2023) is $0.3274.
$0.3274 multiplied by 24 months equals $7.85.
Rounded to the nearest $0.10 equals $7.90.
So, John's penalty amount would be $7.90 per month, which would be added to the monthly premium of the Part D plan he enrolls in.
It's important to note that the Part D penalty is a lifetime penalty. Once a person incurs the penalty, it will be added to their monthly premium for as long as they have Medicare Part D coverage. Therefore, it is essential to enroll in a Part D plan as soon as you become eligible to avoid unnecessary penalties.
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- Medicare Part D Penalties: What is it and How is it calculated?Medicare Part D Penalties: What is it and How is it calculated?Medicare Part D Penalties: What is it and How is it calculated?
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