The late enrollment penalty is an amount that’s added to a person’s monthly Part D premium because they enrolled “late”. A person enrolled in a Medicare drug plan may owe a late enrollment penalty if for any continuous period of 63 days or more after the Initial Enrollment Period, they went without one of these:
- A Medicare Prescription Drug Plan (Part D)
- A Medicare Advantage Plan (Part C) (like an HMO or PPO)
- Another Medicare health plan that offers Medicare prescription drug coverage
- Creditable prescription drug coverage
The Late Enrollment Penalty (also called the “LEP” or “penalty”) is added to the person’s monthly Part D premium for as long as they have Medicare prescription drug coverage. This penalty is required by law and is designed to encourage people to join a Medicare drug plan when they’re first eligible or to keep other creditable prescription drug coverage. The Late Enrollment Penalty amount changes each year. The person will have to pay it each month as long as they have Medicare prescription drug coverage, even if the person changes their Medicare drug plan.
Does the Late Enrollment Penalty apply to Medicare Advantage plans that include drug coverage (MAPD)?
Yes. If the person has been without "creditable" prescription drug coverage after they were Medicare eligible, they can be assessed a permanent, Late Enrollment premium Penalty when they join a stand-alone Medicare Part D prescription drug plan (PDP) or a Medicare Advantage plan that includes prescription drug coverage (MAPD). The requirements below apply for Part D and Medicare Advantage plans.
Anyone who qualifies for Extra Help under Part D may join a Medicare drug plan with no penalty. Any uncovered months from before the person became eligible for Extra Help won’t be counted in determining the person’s Late Enrollment Penalty. However, if the person loses Extra Help they may be charged a penalty if they have a break in coverage.
Creditable prescription drug coverage (also called “creditable coverage”) is coverage that meets Medicare’s minimum standards which means it’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. Most plans that offer prescription drug coverage, such as plans from employers or unions, must send their customers an annual notice explaining how their prescription drug coverage compares to Medicare prescription drug coverage and if it’s creditable coverage. If a person with Medicare doesn’t get a separate written notice, their plan may provide this information in its benefits handbook. If the person doesn’t know if the prescription drug coverage they have is creditable, they should contact the plan.
- To calculate the Late Enrollment Penalty :
- – Count the number of full months the person delayed enrolling in a Medicare drug plan (after they were eligible to enroll) or count the number of full months they did not have creditable prescription drug coverage (if the break in overage was 63 days or more)
- – The penalty is 1% for every month the person did not have creditable coverage (e.g., if they go 14 months without coverage, the penalty will be 14%)
- Then Medicare determines the amount of the base beneficiary premium (which is national) for the coverage year. For 2019, this average premium amount is $33.19.
- To calculate the monthly penalty, you multiply the penalty percentage and the average monthly premium and then round it to the nearest 10 cents.
- In the example here it would be 14% times $35.02, which equals $4.64. Rounding to $4.60. This amount would be added to the monthly premium for someone with a Late Enrollment Penalty.
In general, a person with a Late Enrollment Penalty will continue to owe a penalty for as long as he or she is enrolled in a Medicare drug plan. This means that even if the person decides to join another Medicare drug plan, they will still have to pay a penalty with the new plan. This also means that if a person joins a plan that has a $0 monthly premium, they will still owe a penalty.
If Medicare reports a person has a break in creditable coverage, will they have a chance to tell the plan about their prior drug coverage?
Yes. When a person joins a Medicare drug plan, the plan will review Medicare’s systems to see if the person had a break in creditable coverage for 63 days or more.
- If there is a break in coverage, the Medicare drug plan will send the person a notice asking for information about prior prescription drug coverage.
- This notice is called the “Declaration of Prior Prescription Drug Coverage.” It’s very important that the person complete this form and return it to the plan by the date stated on the form. This is the person’s chance to let the plan know about prior coverage that might not be in Medicare’s systems.
- The person can also send any proof of their prior coverage, such as a copy of the “Notice of Creditable Prescription Drug Coverage” from an employer or union plan. If the plan allows the person to provide this information over the telephone instead, they must do so by the date stated on the form.
The information provided to the plan will help the plan tell Medicare whether there was a break of 63 days or more in creditable coverage. Then Medicare, not the plan, will determine the penalty amount using the calculation method described above. You will receive a letter from the plan notifying you of any penalty.
If a person doesn’t agree with the Late Enrollment Penalty, they can ask Medicare to review its decision. There are two ways to do this.
- Attestation to the plan. You may submit an attestation in writing or over the phone within 30 days from when the “Declaration of Prior prescription Drug Coverage” letter was mailed.
- Reconsideration sent to Medicare. If you were not able to submit an attestation then this is how to request a review.
Here is the process for a reconsideration:
- The person’s drug plan will send information about how to request reconsideration, including a “Late Enrollment Penalty Reconsideration Request Form.” The form lists the reasons a person can use to ask for a review of their case.
- If the person wants a review of their case, they should complete the form and return it within 60 days to the address or fax number listed on the form, and a Medicare contractor will review the case.
- The person should also send any proof that supports their case, such as information about previous creditable coverage. For example, to document prior coverage they should provide a copy of the “Notice of Creditable Prescription Drug Coverage” from employer or union coverage.
- The person and the plan will receive a letter when the review is complete.
In general, reconsideration decisions are made within 90 days. Medicare’s contractor will try to make a decision as quickly as possible.
Is there a late enrollment penalty if a person waits one month after he or she was first eligible to enroll in a Medicare drug plan?
No. A person must be without creditable coverage 63 days or more any time after they were first eligible to enroll, to be charged a late enrollment penalty.
If Medicare’s contractor reviews a case and decides that all or part of the Late Enrollment Penalty is wrong, the Medicare contractor will send the person and their drug plan a letter explaining its decision. The Medicare drug plan will correct the Late Enrollment Penalty and will send the person a letter that shows the correct premium amount and explains whether there will be a refund.