Utah · Part D and late enrollment

How Much Is the Part D Late Enrollment Penalty in 2027?

About $0.41 a month for every full month you went without drug coverage, and it stays on the bill for as long as you have Part D. Medicare sets the 2027 amount from a base premium of $41.33, up 6% from 2026, so every penalty already being paid goes up in January too. Here is the table, the rule that decides whether your employer plan counts, and the two ways to get a penalty removed.

Medicare On Main Data Desk

Published September 30, 2026 · 9 min read · Reviewed by Brian Penner, 22+ years in Medicare

The penalty question comes up two ways in our Moab office. Someone who is 65, still working and covered by a high-deductible plan at work wants to know whether skipping Part D will cost them later. And someone who is 71, retired for a while and never bothered with a drug plan gets a letter from the plan they finally joined saying a penalty has been added. Both want the same number, and for 2027 it can be figured to the dime.

Utah had 490,235 people on Medicare in June 2026, according to the CMS monthly enrollment file. 392,485 of them, about 80%, had Medicare drug coverage, 140,879 through a stand-alone plan and 251,606 through a Medicare Advantage plan. That leaves 97,750 without one. Many are covered through a job, a spouse's job, the VA, TRICARE or Indian Health Service, all of which count. Everyone else is accumulating months.

The 2027 penalty, month by month

Medicare's own fact sheet prints the formula: "1% × national base beneficiary premium × number of full months without Part D or creditable coverage," and "the monthly penalty is rounded to the nearest $0.10 and added to your monthly Part D premium." CMS set the 2027 base beneficiary premium at $41.33 on July 28, 2026. The 2026 figure was $38.99.

Our arithmetic using the formula and rounding rule in CMS Product No. 11222, the 2026 base premium printed there and the 2027 base premium from CMS. The 10-year column holds the 2027 rate flat; in practice it rises with the base premium.

The 17-month row is Medicare's own example. Ray dropped his drug plan in August 2024 and rejoined for January 2026, "17 months (August 1, 2024–December 31, 2025) without creditable coverage." His penalty is 17% of the base premium: "$6.63 rounded to the nearest $0.10 = $6.60" for 2026. In 2027 the same 17% of $41.33 is $7.00. Nothing about Ray changed.

Two things the table does not show. The penalty is added to a plan premium that is never zero for someone paying it: Medicare says you pay it "even if you switch plans or join a plan that has a $0 monthly premium." And it is charged per person. A couple who both went without coverage pay two penalties.

Base premiums and the 6% cap from CMS; 63 days from 42 CFR § 423.46; 73% from 42 CFR § 423.56(a)(2)(iii).

Why a penalty you already pay goes up in January

The percentage is set once. The dollar amount is not. Medicare refigures it every year from that year's base beneficiary premium, and CMS's July announcement explains why 2027's jump is as large as it is: "Between 2024 and 2029, the annual increase in the base beneficiary premium is capped by the IRA's premium stabilization provision not to exceed 6% per year. For 2027, the base beneficiary premium will be $41.33." The cap was hit. $38.99 plus 6% is $41.33.

So the 24-month penalty goes from $9.40 to $9.90, and the 60-month penalty from $23.40 to $24.80. Small numbers, but they compound in the wrong direction: a penalty that started at $9.90 a month at age 70 and grew with the base premium is a meaningful line on a budget at 85. The same July announcement is the one that ended a temporary premium subsidy for stand-alone drug plans, which we covered in the 2027 Part D premium post. The two are related only in timing; the penalty rule itself did not change.

What counts as creditable coverage

The penalty only counts months when you had no Part D plan and no other creditable drug coverage. 42 CFR § 423.56(a) defines creditable as coverage whose actuarial value "equals or exceeds the actuarial value of defined standard prescription drug coverage under Part D." Paragraph (b) lists the kinds of coverage that can qualify:

Categories from 42 CFR § 423.56(b); every category still has to meet the actuarial test in paragraph (a). Medicare's fact sheet: "Your plan must tell you in writing whether your coverage is creditable."

The 2027 test your employer plan has to pass

This is the part that changed, and it is the part that matters most for people still working at 65. Since the Inflation Reduction Act rebuilt the Part D benefit, standard Part D coverage is worth more than it used to be, so an employer plan has to be worth more to match it. The April 2026 final rule put a number on it: "For 2027, we are finalizing the percent value at 73 percent." That means a group plan using CMS's simplified test must be "designed to pay on average" at least 73% of its members' prescription drug expenses. The rule describes the history in one sentence: the 2026 threshold was 72%, "versus 60 percent under the prior methodology" that applied through 2024.

The rule also names the plan type most likely to have trouble: "plans with higher annual deductibles (including high deductible health plans) might have appeared less likely to meet the requirement," though CMS adds that the risk "may be mitigated" if the plan does not apply the deductible to maintenance drugs or has lower cost sharing than Part D once the deductible is met. In plain terms, the high-deductible plan paired with a health savings account, the arrangement many Utah professionals keep past 65 for the HSA contributions, is exactly the plan that can fail the test. Some pass. Some do not. The plan has to run the numbers, and it has to tell you the result.

The telling is not optional. Section 423.56(f) requires the creditable-coverage notice before your Initial Enrollment Period, whenever the status changes, and "prior to the commencement of the Annual Coordinated Election Period," which is October 15. If the coverage is not creditable, paragraph (d) says the notice must state that fact, that enrollment periods are limited, and "That the individual may be subject to a late enrollment penalty." That notice is also your evidence. Keep every one of them.

How the months are counted

42 CFR § 423.46(a) sets the trigger: "a continuous period of 63 days or longer at any time after the end of the individual's initial enrollment period" during which you were eligible for Part D, "not covered under any creditable prescription drug coverage" and "not enrolled in a Part D plan." Three practical consequences:

• A gap under 63 days costs nothing. Retiring on June 30 and having a Part D plan start September 1 is 62 days. Starting it October 1 is not.
• Only full months count. Ray's August 2024 through December 2025 is 17 months because his coverage ended on July 31 and restarted on January 1.
• The clock starts when the Initial Enrollment Period ends, which is three months after the month you turn 65. Someone who turned 65 in March 2024 with no coverage and joins a plan for January 2027 is at 30 months, $12.40 a month at the 2027 rate.

Losing employer coverage does open a door. 42 CFR § 423.38(c)(1) gives a Special Enrollment Period to someone who "involuntarily loses creditable prescription drug coverage," and (c)(2) gives one to someone who "was not adequately informed" that the coverage was not creditable. Neither one pauses the 63-day count, so the plan you pick with that window should start before the count runs out.

When you join a plan, it checks Medicare's records for a gap of 63 days or more and, if it finds one, sends a form asking about prior coverage. Medicare's fact sheet: "It's important to complete, sign, and return the form by the deadline listed on it." The form is where the employer notices earn their keep.

Two ways a penalty comes off

Reconsideration. The penalty letter comes with a form. Return it "within 60 days of the date on the letter," with proof such as "a copy of your notice of creditable prescription drug coverage from an employer or union plan." A Medicare contractor that is not the plan decides, "in general" within 90 days. Two hard edges: "you must pay the penalty with your premium even if you don't agree with it," including while the case is pending, and the regulation says the decisions "are not subject to appeal." If the contractor agrees with you, the plan removes or adjusts the penalty and explains whether you get a refund.

Not adequately informed. Section 423.56(g) covers the person whose employer never sent the notice: "If an individual establishes to CMS that he or she was not adequately informed that his or her prescription drug coverage was not creditable prescription drug coverage, the individual may apply to CMS to have the coverage treated as creditable." This is the route for the retiree who stayed on a small-company plan for three years, was never told it fell short, and got a 36-month penalty on joining Part D. It requires showing the notice did not come, which is easier when you asked for it in writing at the time.

One exception to all of the above: people who qualify for Extra Help do not pay the penalty while they have it, and months before they qualified are not counted. That is a small share of the readers of this post, and the rules are in Medicare's fact sheet.

What a drug plan buys against the penalty

The people who skip Part D usually take nothing and see the premium as money down a hole. Two facts for that argument. First, the penalty is permanent and the premium is not; you can drop a plan when your situation changes, but you cannot drop a penalty. Second, the 2027 benefit has a hard ceiling: Medicare.gov lists a maximum deductible of $700 and an out-of-pocket cap of $2,400 for the year. A plan with a low premium joined during open enrollment stops the clock on January 1 and puts that cap between you and the first expensive prescription. Our post on skipping Part D when you take nothing works through that decision in more detail.

What I would do

If you are turning 65 in the next year and staying on an employer plan, find the creditable-coverage notice before October 15. If you cannot find it, ask HR or the plan in writing whether the coverage is creditable for 2027 under the 73% test, and keep the answer. A high-deductible plan deserves the question twice.

If you retired without a drug plan and have been counting on being healthy, count the months instead. Multiply by $0.41. That is what each additional month adds to every future bill, and joining a plan during open enrollment for January 1 is the only way to stop it. If you have already been assessed a penalty you think is wrong, the 60-day reconsideration clock started on the date of the letter, so do not wait for the next one.

In Grand County, 1,762 people were on Original Medicare and 537 on Medicare Advantage in June 2026, and 33.3% of adults live with high blood pressure and 11.2% with diabetes, per CDC PLACES. Those are conditions treated with the kind of maintenance prescriptions a $700 deductible and a $2,400 cap were built for. We help people compare drug plans every October from our Moab and Monticello offices, and the penalty math is always the first thing on the page.

How we know all this: the Medicare On Main Data Desk frames every article with public data — here, CMS's July 28, 2026 release of the 2027 Part D base beneficiary premium and the 6% cap; Medicare's fact sheet on the Part D late enrollment penalty (CMS Product No. 11222) for the formula, rounding rule, examples and reconsideration process; 42 CFR §§ 423.46 and 423.56 as published on Cornell LII, including the 73% value for 2027; the April 6, 2026 Federal Register final rule for the creditable-coverage history and the high-deductible discussion; Medicare.gov for the 2027 deductible and out-of-pocket figures; the CMS Medicare Monthly Enrollment file for Utah and Grand County; and CDC PLACES for Grand County health prevalence. Medicare On Main is a licensed independent insurance agency. We do not offer every plan available in your area. Any information we provide is limited to the plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options. Not connected with or endorsed by the U.S. government or the federal Medicare program. Education, not advice: whether your employer plan is creditable is decided by the plan, not by us, and penalty determinations are made by Medicare and its contractor.