Medicare’s Part D Late Penalty Gets a 6% Raise for 2027 — and It Never Goes Away. One October Letter Decides Whether You Owe It.

If you’re 65 and still on a work or retiree drug plan, the “creditable coverage” notice due by Oct. 15 is the paperwork that proves you don’t owe a lifetime surcharge that just got bigger.

On July 28, CMS set the 2027 Part D “national base beneficiary premium” at $41.33, up from $38.99 this year (CMS fact sheet, July 28, 2026). That’s not what you pay for a drug plan. It’s the number Medicare uses to compute the late enrollment penalty — so everyone already paying that penalty gets a 6% increase in January, and everyone who earns one this year pays it at the higher rate. For life.

What’s true right now

The rule, from Medicare.gov (accessed Sept. 5, 2026): if, after your Initial Enrollment Period ends, you go 63 or more days in a row without Medicare drug coverage or other “creditable” drug coverage, you owe a penalty when you join a plan. It’s 1% of the base premium for every full month you went without, rounded to the nearest dime, added to your premium every month for as long as you have Medicare drug coverage — even if you switch plans.

The base premium is reset every year. The Inflation Reduction Act caps its annual increase at 6% through 2029 (CMS, July 28, 2026); for 2027, CMS used the full 6%. A penalty you earned once is repriced upward every year.

“Creditable” means coverage expected to pay, on average, at least as much as standard Part D. Employer, union, retiree, and VA drug coverage can qualify (NCOA, “Medicare Part D Late Enrollment Penalty”). Your plan must tell you in writing, every year, before Oct. 15, whether its drug coverage is creditable (Hylant compliance brief citing CMS guidance, May 11, 2026).

What this means for your wallet

Medicare.gov’s own example is a 14-month gap: 14% of $38.99, or $5.50 a month in 2026. In 2027 that’s 14% of $41.33, or $5.80. Small — until you multiply.

• Waited 14 months: $5.80/month in 2027, about $70 a year.
• Waited 43 months (joined a plan just before 69): $17.80/month, about $214 a year.
• Worked to 70 on a plan that wasn’t creditable (60 months): $24.80/month, about $298 a year — and it climbs again in 2028, 2029, and every year after.

Over a 20-year retirement, the 60-month case runs about $6,000 before a single future increase. Switching plans doesn’t shed it (Medicare.gov).

The alternative is cheap. Medicare.gov’s own tip: even if you take few or no drugs, consider a low-premium plan to avoid the penalty. Every Part D plan must cover a wide range of the drugs people on Medicare take, so the lowest-premium plan in your ZIP code at Medicare.gov/plan-compare is real coverage, not a placeholder.

The catch worth knowing

This is the part nobody’s telling the 66-year-old still at work. CMS rewrote the test employers use to decide whether a plan counts as creditable. Under the old “simplified” method, a plan had to pay about 60% of drug costs. For 2026, employers may use the old test or a new 72% test. For 2027 plan years, the old test is gone: a plan must pay at least 73% to be creditable (Hylant, citing CMS’s final 2026 Part D redesign instructions, May 11, 2026).

Translation: a work plan that was creditable last year may not be next year, with no change to the plan itself. If you don’t enroll in Part D within 63 days of that switch, the penalty clock starts — and you may not find out until you retire and the first bill arrives.

Three things to do before Oct. 15:

• Find the notice. It’s a one-page letter, often buried in open-enrollment mailings or a benefits portal, and it says “creditable” or “not creditable.” If you haven’t seen one by Oct. 15, ask HR for it in writing.
• Keep it. When you join a Part D plan, you’ll be asked to prove you had creditable coverage. That letter is the proof.
• If it says “not creditable,” look at the calendar. Medicare Open Enrollment runs Oct. 15 to Dec. 7 for coverage starting Jan. 1, and losing creditable coverage also opens a Special Enrollment Period (Medicare.gov, “Special Enrollment Periods”). Either way, 63 days is the number to beat.

Two exceptions: if you qualify for Extra Help, the penalty doesn’t apply to you (Medicare.gov). And if you’re charged a penalty you believe is wrong, the plan must send a reconsideration form with the notice, and an independent reviewer under contract with Medicare decides, generally within 90 days (CMS guidance, “Late Enrollment Penalty Appeals”).

The takeaway

The Part D penalty is the only Medicare bill that gets a raise every year for a decision you made once. The fix takes minutes: find your creditable-coverage letter before Oct. 15, file it where you’ll find it in five years, and if it says “not creditable,” price the lowest-premium drug plan in your ZIP code before Dec. 7. A free, unbiased counselor at your State Health Insurance Assistance Program (SHIP) can walk you through it — find yours at shiphelp.org.

This is information, not financial, legal, or medical advice. Medicare rules and dollar figures are as of the dates shown. Senior Savers is independent and not affiliated with Medicare or the federal government. Talk to a licensed professional or your SHIP counselor about your own situation.

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