How the Part D penalty works
- The penalty is 1% of the national base beneficiary premium for each full month without coverage. For 2026 the base premium is $38.99, so a 24-month gap adds 24% of it, about $9.36 a month before Medicare rounds to the nearest 10 cents.
- Medicare figures the penalty; your drug plan bills it with your premium. It applies whether you join a stand-alone drug plan or a Medicare Advantage plan with drug coverage.
- The base premium changes every year, so the dollar amount of the penalty can change even though the percentage stays the same.
- People under 65 with Medicare because of a disability get a fresh start at 65: penalties from before 65 end.
What counts as creditable coverage
Creditable drug coverage is expected to pay, on average, at least as much as standard Part D. Common sources:
- Employer or union plans, including PEBB and OEBB: your plan sends a creditable coverage notice each year before October 15.
- VA drug coverage and TRICARE.
- Indian Health Service, tribal health programs and urban Indian organizations: their drug coverage counts as creditable, so a Part D plan can't charge the penalty for those months. Ask your clinic for its creditable coverage letter.
- PERS Health Insurance Program Medicare plans include Part D, so PHIP members don't need a separate drug plan.
Keep every notice; a plan may ask for proof years later. More on Part D creditable coverage in Oregon and Medicare Part D in Oregon.
How to avoid the penalty
- Join a Part D plan, or a Medicare Advantage plan with drug coverage, during your Initial Enrollment Period if you don't have other creditable coverage.
- If you have creditable coverage, join a Medicare drug plan within 63 days after it ends.
- If you have limited income, apply for Extra Help or an Oregon Medicare Savings Program.
Sources
- Medicare.gov — Costs for Medicare drug coverage (late enrollment penalty)
- Medicare.gov — Avoid late enrollment penalties
- CMS — Creditable coverage
- Oregon PERS — About the PERS Health Insurance Program
- Social Security — Extra Help with Medicare prescription drug costs
Frequently asked questions
When does the Part D penalty apply?
When you go 63 days or more in a row without a Medicare drug plan or other creditable drug coverage after your Initial Enrollment Period ends. Shorter gaps don't count.
What counts as creditable drug coverage in Oregon?
Coverage expected to pay at least as much as standard Part D, such as many employer and union plans, VA and TRICARE drug coverage, and Indian Health Service or tribal health program drug coverage. PEBB, OEBB and other employer plans send a yearly notice saying whether theirs is creditable; keep those notices.
Does Extra Help remove the penalty?
Yes. If you qualify for Extra Help, you don't pay a Part D late enrollment penalty. People with full OHP or a Medicare Savings Program get Extra Help automatically.
What if I think my penalty is wrong?
Ask for a reconsideration. Your plan's letter explains how; you generally have 60 days from the date on the letter. Send copies of your creditable coverage notices or other proof.
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