Published by AffordableCareAgents.com
Each year during the Annual Enrollment Period (AEP), Medicare beneficiaries review their prescription drug coverage and often ask about the Medicare Part D Late Enrollment Penalty (LEP). This penalty is one of the most misunderstood aspects of Medicare, and it’s important to clarify how it works—and what brokers can and cannot discuss under CMS rules.
This article provides a clear explanation of the penalty, how it’s determined, and guidance for licensed health brokers who want to remain fully compliant while educating beneficiaries.
What Is the Medicare Part D Late Enrollment Penalty?
The Medicare Part D Late Enrollment Penalty is an additional charge added to a beneficiary’s monthly prescription drug premium if they go 63 consecutive days or more without creditable prescription drug coverage after becoming eligible for Medicare.
Creditable coverage means drug coverage that is at least as good as Medicare’s standard Part D plan. Examples include:
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Employer or union group health plans
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Veterans Affairs (VA) prescription benefits
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TRICARE
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Federal Employee Health Benefits (FEHB)
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Certain retiree drug plans
If a beneficiary goes 63+ days without creditable coverage, Medicare may apply a penalty once they enroll in a Part D plan.
How the Medicare Part D Penalty Is Calculated
Medicare calculates the penalty using the following formula:
1% × National Base Beneficiary Premium × Number of Uncovered Months
The national base premium is updated each year. Medicare rounds the final penalty to the nearest $0.10 and adds it to the member’s monthly premium.
Unless the beneficiary qualifies for the Extra Help program, the penalty remains in place as long as they stay enrolled in Medicare Part D.
How Licensed Health Brokers Should Approach the Part D Penalty
(What You Can Say, What You Can’t Say, and What You Can Do)
CMS mandates strict rules regarding what licensed agents may and may not discuss. Below is the correct, compliant approach for health brokers during AEP or any enrollment period.
What Brokers Can Say
Licensed brokers are allowed to:
1. Explain the Part D penalty in general terms
You may describe:
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How the penalty works
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Why it exists
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When it applies
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The importance of creditable coverage
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How Medicare counts “uncovered months”
Example compliant language:
“The Part D penalty applies when someone goes 63 or more days without creditable prescription coverage. Medicare calculates it based on the number of months without coverage.”
2. Educate about creditable coverage
You may help the beneficiary understand:
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What qualifies as creditable
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Why annual creditable coverage notices matter
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How employer or retiree plans may satisfy Part D requirements
3. Review the beneficiary’s options
You may:
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Compare Medicare Advantage and Part D drug plans
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Check formularies
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Review pharmacy networks
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Look at premiums, deductibles, and drug tiers
This is the core of your role as a broker.
4. Send beneficiaries to Medicare for their exact penalty
You are required to direct them to official sources.
Compliant language:
“Only Medicare can determine your specific late enrollment penalty. You can call 1-800-MEDICARE to get your exact amount and details.”
What Brokers Cannot Say
To remain fully CMS-compliant, brokers must not:
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Calculate a beneficiary’s specific Part D penalty
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Estimate the penalty or give “ballpark” numbers
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Suggest that you can “remove” or “fix” a penalty
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Advise on whether Medicare’s penalty calculation is right or wrong
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Use internal terminology or speculate about Medicare systems
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Discuss personal Medicare eligibility data beyond what the beneficiary directly provides
Non-compliant example (do NOT say):
“Based on your months without coverage, your penalty should be around $12.40.”
What Brokers Can Do
The broker’s role is to guide—not determine penalties.
Brokers may:
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Explain general penalty rules
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Educate clients on avoiding future penalties
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Help choose the best Part D or MAPD plan
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Verify client-provided information
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Assist with enrollment
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Direct members to Medicare for penalty specifics
This helps the beneficiary make informed choices while keeping you compliant with CMS communications regulations.
How Beneficiaries Can Get Their Exact Penalty Amount
Since agents cannot calculate penalties, beneficiaries must contact Medicare directly for this information.
Medicare can provide:
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Their exact penalty amount
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How many months were counted
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Whether creditable coverage was recognized
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How to begin an appeal if needed
Medicare Contact Information:
1-800-MEDICARE (1-800-633-4227)
TTY: 1-877-486-2048
Available 24/7
Appealing a Medicare Part D Penalty
If a beneficiary wishes to appeal the penalty, the process is handled by Maximus Federal Services, an independent CMS contractor.
Beneficiaries may need to supply:
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Creditable coverage letters
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Proof of employer or union drug coverage
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Correspondence showing coverage dates
Brokers may educate clients about why an appeal may be necessary, but brokers cannot complete, influence, or submit appeals.
How Brokers Provide Value During AEP
Even without calculating penalties, brokers play a vital role by:
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Comparing plan benefits and costs
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Reviewing prescription coverage
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Checking pharmacy and provider networks
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Identifying cost-saving opportunities
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Explaining benefits like dental, vision, OTC, transportation, and more
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Simplifying the enrollment process
The goal is to help beneficiaries secure the most suitable, affordable, and comprehensive Medicare coverage.
Key Takeaways
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The Part D Late Enrollment Penalty applies when someone goes 63 or more days without creditable drug coverage.
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Brokers cannot calculate or discuss a beneficiary’s exact penalty amount.
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Beneficiaries must call Medicare directly for official penalty details.
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Brokers play a critical role in educating, comparing plans, and enrolling beneficiaries.
Official CMS References
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Medicare.gov – Late Enrollment Penalties
https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/late-enrollment-penalty -
CMS – Creditable Coverage Guidelines
https://www.cms.gov/medicare/prescription-drug-coverage/creditablecoverage -
CMS – Medicare Communications & Marketing Guidelines (MCMG)
https://www.cms.gov/files/document/2025-medicare-communications-and-marketing-guidelines.pdf -
CMS – Part D Appeals & Reconsideration
https://www.cms.gov/Medicare/Appeals-and-Grievances/PartDEnrolleeAppeals -
Medicare & You Handbook
https://www.medicare.gov/Pubs/pdf/10050-medicare-and-you.pdf
