Late Enrollment Penalty (or LEP)

The initial enrollment period for Medicare Part D is the same as the initial enrollment period for Medicare. It begins 3 months before your 65th birthday and ends 3 months afterward. Most people enroll in Part D during this time as well, unless credible coverage from an employer or a source like the VA is in place. Although Part D is considered "optional", it is a very important piece of the puzzle when considering Medicare health plan options and to avoid penalties for late enrollment.

If no other credible drug coverage is in place and you miss enrolling in the 7 month initial enrollment period, you will start accumulating a penalty that grows over time and is enforced every month after you enroll into a Part D plan. The late enrollment penalty incurs at 1% of the national average premium for every month you waited. In other words, for every month you could have been enrolled in Part D, but were not. Oftentimes those in this position either did not take drugs or this penalty was never explained to them. For example, maybe they did not take any medications or they are not very expensive and they did not think they needed a Part D plan.