Part D enrollment · Montrose County, Colorado · Plan years 2026–2027

The Part D late enrollment penalty in 2026: how the 1% a month works, what "creditable coverage" means, and why this fall's notice matters in Montrose County

Sometime before October 15, anyone in Montrose, Olathe or Nucla who has Medicare and drug coverage through an employer, a union or a retiree plan gets a short letter most people file without reading. It says whether that coverage is "creditable." The answer decides whether skipping Medicare drug coverage costs nothing — or adds a surcharge to every drug plan premium you pay for the rest of your life. For 2027, the test behind that letter got harder to pass.

Bemis Insurance Data Desk

Reviewed by Trinity Bemis, Licensed Insurance Broker & Medicare Specialist (NPN 21424070) · Published 2026-09-21

The short answer

The Part D late enrollment penalty is a permanent surcharge on your Medicare drug plan premium. You owe it if, after your Initial Enrollment Period ends, you go 63 or more days in a row without either a Medicare drug plan or other "creditable" drug coverage — coverage expected to pay at least as much as Medicare's. The surcharge is 1% of the national base beneficiary premium ($38.99 in 2026) for each full month you went without, and you generally pay it for as long as you have Medicare drug coverage.

Unlike the Part B late enrollment penalty, this one does not announce itself. Nobody sends a bill when you skip Part D. The penalty is calculated years later, by the drug plan you eventually join, from a gap you may not remember — and the one document that can erase it is a notice most people threw away. That is why the fix is mostly paperwork, and why the weeks before Medicare Open Enrollment (October 15 – December 7) are the moment to do it.

Sources: Medicare.gov — The Part D Late Enrollment Penalty (CMS Product No. 11222, July 2026) · CMS — Medicare Part D 2027 National Average Monthly Bid Amount Information (July 28, 2026) · Federal Register — Contract Year 2027 Medicare Advantage and Part D final rule, 91 FR 17384 (April 6, 2026), amending 42 CFR 423.56 · CMS — Medicare Monthly Enrollment (data.cms.gov), calendar year 2025, retrieved September 21, 2026. Plan years 2026 and 2027.

How is the penalty calculated?

Medicare's fact sheet gives the formula in one line: 1% × national base beneficiary premium × number of full months without Part D or creditable coverage. The result is rounded to the nearest $0.10 and added to your plan's monthly premium. The base beneficiary premium is a national figure CMS publishes each summer; it has nothing to do with the premium of the plan you pick. For 2026 it is $38.99.

Medicare's own example: Ray dropped his drug plan effective August 1, 2024 and joined another during Open Enrollment in fall 2025, effective January 1, 2026. That is 17 full uncovered months, so a 17% penalty. 0.17 × $38.99 = $6.63, which rounds to $6.60 a month in 2026, on top of his premium.

Two features make the penalty heavier than it first looks. First, the percentage is fixed but the dollar amount is not. Medicare: "Since this amount can change each year, the amount of your penalty can also change each year." On July 28, 2026 CMS announced a 2027 base beneficiary premium of $41.33, so every existing penalty in the country goes up about 6% on January 1. Second, it follows you — "even if you switch plans or join a plan that has a $0 monthly premium." A plan with a $0 premium and a 36-month penalty is a plan that costs $14.90 a month in 2027.

Here is the arithmetic at six lengths of gap, in both years:

Sources: Medicare.gov — The Part D Late Enrollment Penalty (CMS Product No. 11222, July 2026) (formula, rounding rule and 2026 base beneficiary premium) · CMS — Medicare Part D 2027 National Average Monthly Bid Amount Information (July 28, 2026) (2027 base beneficiary premium). The table applies Medicare's published formula and is an illustration, not a determination of anyone's penalty; your plan and Medicare calculate the actual amount. Plan years 2026 and 2027.

There is no cap on the number of months. CMS's guidance to plans also makes clear the months are cumulative across your lifetime: its example is a Mr. Green who drops coverage for 12 months, rejoins, later drops it again for 24, and is assessed on 36. Someone who turned 65 in 2016, never had creditable coverage and joins for 2027 is looking at a penalty north of 100% of the base premium — more than $41.33 a month, every month, before paying for the plan itself.

Where the count starts: at the end of your Initial Enrollment Period, the seven-month window around your 65th birthday (or around your 25th month of disability benefits). Months before that do not count, and neither do months when you were not eligible for Part D at all — living outside the United States, for example.

What counts as creditable coverage, and what does not?

Medicare.gov's definition: creditable prescription drug coverage is "prescription drug coverage that's expected to pay, on average, at least as much as Medicare drug coverage." It is an actuarial judgment about the plan as a whole — not about whether the plan happened to cover your drugs well, and not about whether you liked it.

Sources: Medicare.gov — Creditable prescription drug coverage · Medicare.gov — How Medicare Works With Other Insurance (CMS Product No. 02179) · CMS — Creditable Coverage and Late Enrollment Penalty (Chapter 4 guidance for Part D plans, revised July 22, 2025). Retrieved September 2026.

The last row is the one that catches healthy people. A retired rancher in Olathe who fills one generic a year with a pharmacy discount card for a few dollars has, as far as Medicare is concerned, no drug coverage. Every month of that counts.

The second row is the one that catches working people. If you are 66, still on the job in Montrose and on your employer's plan, you were probably told — correctly — that you can delay Part B without penalty while you have that coverage. Many people assume the same goes for Part D. It does only if the drug coverage is creditable, and that is a separate fact about a separate part of the plan. Our working past 65 guide covers the Part B side; this is the Part D side.

Why does this fall's notice matter more than usual?

CMS requires every group health plan with drug coverage to tell its Medicare-eligible members — active workers, retirees, COBRA enrollees, disabled members and their dependents — whether the coverage is creditable. The notice must go out each year before October 15, and again whenever a Medicare-eligible person joins the plan or the plan's status changes. It often arrives as a page or two inside a thick open-enrollment packet.

For most of Part D's history that notice was routine, because the test was easy to pass. Since 2009, an employer that did not want to pay an actuary could use CMS's "simplified determination": broadly, cover brand and generic drugs, give reasonable pharmacy access, and be designed to pay at least 60% of participants' drug costs.

Then Part D got better. The Inflation Reduction Act capped insulin at $35 a month, removed cost sharing on recommended vaccines, eliminated the coverage gap, and put an annual ceiling on out-of-pocket drug costs — $2,100 in 2026 (our out-of-pocket cap guide has the details). A richer Part D benefit is a higher bar for any other plan to match. CMS said so directly in its 2026 program instructions: "the current simplified determination methodology no longer reflects actuarial equivalence with defined standard Part D coverage."

Sources: CMS — Final CY 2026 Part D Redesign Program Instructions (fact sheet, April 7, 2025) · Federal Register — Contract Year 2027 Medicare Advantage and Part D final rule, 91 FR 17384 (April 6, 2026), amending 42 CFR 423.56 · CMS — Contract Year 2027 Medicare Advantage and Part D Final Rule (fact sheet, April 2, 2026) · CMS — Creditable Coverage (disclosure requirements for employers and plan sponsors). Employers may always use full actuarial testing instead of the simplified method; plans receiving the Retiree Drug Subsidy follow separate rules.

In the final rule published April 6, 2026, CMS declined requests for another grace year: "We believe that plans now have adequate experience under the new benefit design to incorporate the changes we proposed and are finalizing in this rulemaking." It finalized the 2027 figure at 73%. The rule singles out one design for comment: plans with higher annual deductibles, including high-deductible health plans, "might have appeared less likely to meet the requirement," though CMS notes they can still pass — by exempting maintenance medications from the deductible, for instance, or charging lower cost sharing once it is met. The same rule also excuses account-based arrangements such as health reimbursement arrangements and flexible spending accounts from sending the notice at all.

None of this means your employer's plan fails; many will pass the new test, and an employer can always pay for a full actuarial determination instead. It means the notice arriving this fall for plan year 2027 is the first one written entirely under the new test, and the first one in years where "same as last year" is not a safe assumption. Find it. Read the sentence that says creditable or not creditable. Keep it somewhere you will find it in ten years.

What if my coverage ends or stops being creditable?

You get a Special Enrollment Period. Medicare.gov describes two versions. If you leave or lose employer or union coverage, including COBRA, your chance to join a Medicare drug plan or a Medicare Advantage plan lasts 2 full months after the month the coverage ends. If you involuntarily lose creditable coverage, or your coverage changes and is no longer creditable, the window is 2 full months after the month you lose it or the month you are notified, whichever is later.

Three cautions about that window.

• It is not the Part B window. People leaving a job at 67 hear "8 months" for Part B and assume Part D matches. It does not. Two months, and the penalty clock is 63 days. Treat Part D as the first errand, not the last.
• Do not use the whole window. Drug plan coverage generally starts the first of the month after the plan receives your request. A window measured in months and a penalty measured in days are different yardsticks; enrolling in the first few weeks keeps you clear of both.
• Ask before you add Part D to an employer plan you are keeping. Medicare's booklet is blunt: "If you have employer or union coverage and add Medicare drug coverage, you may lose your employer or union benefits (including any non-drug health coverage) for yourself and/or your spouse or dependents. If this happens, you may not be able to get your employer or union coverage back." If your notice says "not creditable" but you want to keep the medical side of the plan, call the benefits office first and get the answer in writing.

COBRA deserves its own line. Medicare's booklet says that if you take COBRA "and it includes creditable prescription drug coverage, you'll have a Special Enrollment Period to join a Medicare drug plan without a penalty when COBRA ends." The condition in the middle of that sentence is the whole point: COBRA continues whatever the employer plan was, creditable or not. And COBRA does nothing to protect you from the Part B penalty, which is a separate trap. If you have recently moved to Montrose County from elsewhere, our moving and Special Enrollment guide covers the windows a change of address opens.

Sources: Medicare.gov — Special Enrollment Periods · Medicare.gov — How Medicare Works With Other Insurance (CMS Product No. 02179). Retrieved September 2026.

"I don't take any prescriptions" — is skipping Part D worth it?

This is the most common reason people end up with the penalty, and it is a reasonable-sounding one: why pay a premium for coverage you do not use? It is a fair question, and the honest way to answer it is to put both sides in dollars.

What skipping saves. CMS's 2026 Landscape file lists 10 stand-alone drug plans available everywhere in Colorado, with monthly premiums from $0.00 to $151.90. A person who takes nothing and picks a low-premium plan is paying somewhere between nothing and a few hundred dollars a year to hold their place. (A $0 premium is not the same as no cost — deductibles and copays still apply if you fill something — and the 2027 plan list and prices will differ; they are published each fall.)

What skipping costs. Nothing, until the year it matters. Then two things happen at once. You generally cannot join mid-year just because you got a diagnosis; without a Special Enrollment Period you wait for Open Enrollment and a January 1 start, paying full price for the new prescription in the meantime. And when you do join, every month you skipped is on the meter. Five years of skipping is a 60% penalty: $24.80 a month in 2027, $297.60 that year, rising with the base premium for the rest of your life. Over twenty years of retirement that is thousands of dollars, paid for nothing, to avoid premiums that might have been close to zero.

The health numbers for Montrose County suggest why "I don't take anything" tends to be a temporary condition. CDC's PLACES estimates, crude prevalence among all adults:

Source: CDC PLACES — Local Data for Better Health, County Data, 2025 release, model-based crude prevalence among adults 18 and older, 2023 BRFSS data year, retrieved through the Ambrose Brain cdc_county_health tool and checked against the CDC endpoint on September 21, 2026. Percentages are of all adults, not of Medicare beneficiaries; every one of these conditions is more common after 65.

Among Montrose County adults who have high blood pressure, PLACES estimates 77.0% take medicine to control it. One in three adults with the condition, three in four of those on a daily pill for it: that is the ordinary path from "I don't take anything" at 65 to a pharmacy list at 72. None of this is advice to buy any particular plan. It is the arithmetic of what the choice costs either way, and you should run it with your own numbers — Medicare's Plan Finder shows every plan available to you, and Colorado's SHIP counselors will walk through it with you at no charge.

Sources: CMS — Medicare Advantage / Part D Landscape files (plan premiums and benefits), CY2026 · Medicare.gov — Avoid late enrollment penalties. Plan year 2026 premiums; 2027 amounts illustrate Medicare's formula at the announced $41.33 base.

Can I appeal, and does the penalty ever go away?

The process has two stages, and the first one is where most wrong penalties are made.

Stage one: the form. When you join a drug plan, the plan checks Medicare's records for any stretch of 63 or more days without Part D. If it finds one, it sends you a notice with a form asking what coverage you had. Under CMS's guidance to plans you have 30 days to return it or to call the plan with the answer. Medicare's fact sheet: "It's your chance to let the plan know if you had creditable coverage that they didn't know about. Otherwise, you may get a penalty." Medicare's systems do not know that you were on your spouse's employer plan from 65 to 68. You have to say so. An unreturned form is read as "no coverage."

Stage two: reconsideration. If a penalty is assessed and you disagree, you ask for a reconsideration using the form the plan included with the penalty letter.

1. Send it within 60 days of the date on the letter. If you are late, include an explanation of why.
2. Attach proof — Medicare's example is "a copy of your notice of creditable prescription drug coverage from an employer or union plan." This is the moment the letter you filed in 2026 earns its keep. A letter from a former employer's benefits office confirming dates and creditable status serves the same purpose.
3. A Medicare contractor not connected with your plan decides, generally within 90 days, with a possible 14-day extension.
4. Keep paying in the meantime. Medicare: "By law, the Part D late enrollment penalty is part of the premium, so you must pay the penalty with your premium even if you don't agree with it." Plans can disenroll you for not paying it.
5. If you win, the plan removes or adjusts the penalty, tells you your correct premium, and explains whether you get a refund of what you paid while the case was open.

Medicare adds one limit worth knowing: "If you're already paying the late enrollment penalty, joining a different plan generally won't give you a reason to ask for a reconsideration." The window opens once, with the first letter. The reconsideration is a different track from a coverage denial, which follows the standard Medicare appeal path.

Extra Help changes everything. If you qualify for Extra Help — the Part D low-income subsidy — Medicare's fact sheet says "you won't be charged a late enrollment penalty while you're getting Extra Help," and uncovered months from before you qualified are not counted against you later. In 2025, 1,924 Montrose County residents with Part D had the subsidy. If your income is limited and a penalty is on your premium, checking eligibility is the first move; our Extra Help guide has the 2026 limits and how to apply.

Sources: Medicare.gov — The Part D Late Enrollment Penalty (CMS Product No. 11222, July 2026) · CMS — Creditable Coverage and Late Enrollment Penalty (Chapter 4 guidance for Part D plans, revised July 22, 2025) · CMS — Late Enrollment Penalty (LEP) Appeals · CMS — Medicare Monthly Enrollment (data.cms.gov), calendar year 2025.

Who this touches in Montrose County

In calendar year 2025 CMS counted 13,032 Medicare beneficiaries in Montrose County. Of them, 10,311 — 79% — were enrolled in Medicare drug coverage: 5,086 in a stand-alone Part D plan alongside Original Medicare, and 5,225 through a Medicare Advantage plan with drug coverage. That leaves 2,721 people, 20.9%, with Medicare and no Medicare drug plan. The county's share is typical of the Western Slope:

Source: CMS — Medicare Monthly Enrollment (data.cms.gov), calendar year 2025 annual county figures, retrieved September 21, 2026. Share = (total Medicare beneficiaries − beneficiaries enrolled in Part D) ÷ total beneficiaries: Delta 2,406 of 10,535; Ouray 375 of 1,694; Garfield 2,346 of 10,764; Mesa 8,585 of 41,023; Montrose 2,721 of 13,032; Pitkin 669 of 3,343. This is not a count of people who owe a penalty. It includes everyone whose drug coverage comes from somewhere other than a Medicare plan — the VA, TRICARE, a federal or private employer, a retiree plan — most of which is creditable. CMS does not publish how many of them have no coverage at all.

Read that caveat twice, because the chart is easy to misuse. One in five is not the share of Montrose County in trouble. It is the share for whom the question "is my drug coverage creditable?" is a live one, because Medicare is not the one providing it. A veteran using VA pharmacy benefits is in that fifth and is fine. A retired federal employee on FEHB is in it and is fine. A 68-year-old still on a small employer's high-deductible plan is in it and needs to read this fall's notice. A healthy 70-year-old in Nucla paying cash with a discount card is in it and is accumulating a penalty every month.

The other number to notice is 3,175: the county's Medicare beneficiaries aged 65 to 69 in 2025, the group making the Part D decision for the first time or living with a recent one. For someone in that group with a gap, the penalty is still small — a year is $5.00 a month in 2027. Closing the gap now costs a great deal less than closing it at 75.

And geography shapes the choice once you decide to enroll. CMS's 2026 file listed eleven Medicare Advantage plans open to general enrollment in Montrose County, alongside the 10 statewide stand-alone drug plans. A stand-alone plan, or a Medicare Advantage plan that includes drug coverage, counts as Part D and stops the clock. They differ in almost every other way — networks above all, which our Montrose County HMO and PPO guide works through — but for the purpose of this penalty, they are equal.

Sources: CMS — Medicare Monthly Enrollment (data.cms.gov) · CMS — Medicare Advantage / Part D Landscape files (plan premiums and benefits), CY2026. We do not offer every plan available in your area.

Six things to do before December 7

1. Find this year's creditable coverage notice. If you have employer, union, retiree or COBRA drug coverage, it should arrive before October 15. If it has not, ask the benefits office for it by name: "the Medicare Part D creditable coverage disclosure notice."
2. Read one sentence. It will say your coverage is, or is not, creditable. For 2027 do not rely on last year's letter — the test changed.
3. File it where you will find it in ten years. Keep every year's notice. They are your evidence if a plan ever asks about a gap, and nobody else is required to keep them for you.
4. If it says "not creditable," act inside the window. You have 2 full months from the notice, and Open Enrollment runs October 15 – December 7 for a January 1 start. Ask your benefits office what happens to your other coverage before you add a Medicare drug plan.
5. If you have no drug coverage at all, price the gap. Count your uncovered months since your Initial Enrollment Period ended, find the row in the table above, and compare it with what a low-premium plan costs on Medicare's Plan Finder. The penalty grows by 1% for every month you wait.
6. If you join a plan and get a form about prior coverage, return it within 30 days. If a penalty letter follows and you had creditable coverage, request reconsideration within 60 days and attach the notice.

If you are using Open Enrollment to review everything else at the same time, our guide to reading your 2027 Annual Notice of Change covers the letter your current plan sends, and the Montrose County enrollment action plan lays out the calendar.

We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Assistance Program (SHIP) to get information on all of your options. Bemis Insurance is a licensed independent insurance agency. Not connected with or endorsed by the United States government or the federal Medicare program. This is education, not advice — confirm plans, costs, and eligibility with a licensed agent or Medicare.gov. Figures above are for plan years 2026 and 2027 as labeled and are drawn from the sources listed; the penalty illustrations apply Medicare's published formula and are not a determination of any individual's penalty.

Sources

• Medicare.gov — The Part D Late Enrollment Penalty (CMS Product No. 11222, July 2026)
• Medicare.gov — Avoid late enrollment penalties
• Medicare.gov — Creditable prescription drug coverage
• Medicare.gov — Special Enrollment Periods
• Medicare.gov — How Medicare Works With Other Insurance (CMS Product No. 02179)
• CMS — Medicare Part D 2027 National Average Monthly Bid Amount Information (July 28, 2026)
• CMS — Creditable Coverage (disclosure requirements for employers and plan sponsors)
• CMS — Final CY 2026 Part D Redesign Program Instructions (fact sheet, April 7, 2025)
• Federal Register — Contract Year 2027 Medicare Advantage and Part D final rule, 91 FR 17384 (April 6, 2026), amending 42 CFR 423.56
• CMS — Contract Year 2027 Medicare Advantage and Part D Final Rule (fact sheet, April 2, 2026)
• CMS — Creditable Coverage and Late Enrollment Penalty (Chapter 4 guidance for Part D plans, revised July 22, 2025)
• CMS — Late Enrollment Penalty (LEP) Appeals
• CMS — Medicare Advantage / Part D Landscape files (plan premiums and benefits), CY2026
• CMS — Medicare Monthly Enrollment (data.cms.gov)
• CDC PLACES — Local Data for Better Health, County Data, 2025 release
• Medicare.gov — Find health & drug plans
• Colorado Division of Insurance — Senior health care and Medicare (SHIP)
• SHIP National Technical Assistance Center — find your local SHIP