If you have prescription drug coverage through your employer at age 65, you can delay Medicare Part D enrollment without penalty—as long as your coverage is "creditable." If your drug coverage is NOT creditable and you delay Part D, you'll face a permanent monthly premium penalty for the rest of your life.
What is "Creditable Coverage"?
Creditable drug coverage means your plan's expected coverage is at least as good as Medicare's standard Part D benefit. Your employer or plan administrator is required to send you an annual notice telling you whether your coverage is creditable.
Tip: Save every annual creditable coverage notice you receive. If you eventually enroll in Part D, you may need to prove you had creditable coverage to avoid penalties.
Which Coverage Types Are Creditable?
| Coverage Type | Usually Creditable? |
|---|---|
| FEHB (Federal Employees Health Benefits) | Yes |
| TRICARE | Yes |
| VA prescription drug benefits | Yes |
| Indian Health Service (IHS) drug coverage | Yes |
| Large employer group health plans | Usually—check annual notice |
| Small employer plans | Varies—check annual notice |
| COBRA continuation | Depends on original plan |
| Retiree health plans | Varies—check annual notice |
| ACA Marketplace plans | Usually NOT creditable for Part D purposes |
The 2-Month Part D SEP
When you lose creditable drug coverage (for any reason), you have a 2-month Special Enrollment Period to enroll in Part D without penalty. This is shorter than the 8-month Part B SEP, so act quickly.
Don't confuse the Part B and Part D SEPs. Part B SEP is 8 months from loss of employer coverage. Part D SEP is only 2 months from loss of creditable drug coverage. Both clocks start independently.
How the Part D Late Enrollment Penalty Works
The Part D penalty is calculated as 1% of the national base premium ($38.99 in 2026) for every month you could have had Part D but didn't, rounded to the nearest 10 cents. This penalty is added to your Part D premium for as long as you have Part D—permanently.
Example Calculation
If you delayed Part D for 24 months without creditable coverage:
- 24 months × 1% × $38.99 = $9.36/month penalty
- Added to your Part D premium every month, for life
- Over 20 years of Medicare, that's $2,246 in extra premiums
What If You Disagree With a Penalty?
If Medicare assesses a Part D late enrollment penalty but you had creditable coverage, you can request a reconsideration. You'll need to provide documentation (annual creditable coverage notices) from your former plan.
Avoid the Part D Penalty Trap
Many working-past-65 New Mexicans accidentally trigger Part D penalties by assuming all employer coverage is creditable. A licensed Medicare agent can review your specific coverage and help you transition properly.