Creditable Coverage for Medicare: Part D and Part B Rules
Reviewed October 7, 2026. Creditable coverage is prescription drug coverage that’s expected to pay, on average, at least as much as standard Medicare Part D coverage (CMS). If you have creditable drug coverage, for example through many employer or union plans, you can delay joining a Medicare drug plan without paying the Part D late enrollment penalty later. If your coverage isn’t creditable and you go 63 days or more without creditable coverage after your Initial Enrollment Period, you can owe a penalty for as long as you have Part D (Medicare.gov).
Quick answer: Look for the creditable coverage notice your employer, union or insurer must send before October 15 each year. If it says your drug coverage is creditable, you can wait to join Part D. Keep every notice. Part B works differently: to delay Part B without a penalty, you generally need group health coverage based on current employment, and COBRA or retiree coverage doesn’t qualify.
What is creditable coverage for Medicare?
“Creditable” is a test that applies to prescription drug coverage. CMS defines creditable coverage as coverage that is expected to pay on average as much as the standard Medicare prescription drug coverage (CMS). Your plan’s sponsor runs the calculation; you don’t have to figure it out yourself.
Coverage that is often creditable includes many employer and union group plans (for active workers or retirees), TRICARE, and VA drug coverage. But you can’t assume. Two employer plans can have different results, and a plan can change from creditable to non-creditable from one year to the next. The notice is what counts.
Creditable coverage for Part D: the 63-day rule
You may owe a Part D late enrollment penalty if, at any time after your Initial Enrollment Period ends, you go 63 or more days in a row without Medicare drug coverage or other creditable prescription drug coverage (Medicare.gov).
| Your drug coverage | Can you delay Part D without a penalty? |
|---|---|
| Employer or union coverage that your notice says is creditable | Yes. Join Part D within 63 days after it ends |
| Employer or union coverage that is not creditable | No. Join Part D during your Initial Enrollment Period to avoid a penalty |
| TRICARE or VA drug coverage | Generally yes, these count as creditable; confirm with your program |
| A discount card such as GoodRx | No. Discount programs aren’t insurance and aren’t creditable |
| No drug coverage | No. Penalty months start counting after your Initial Enrollment Period |
How the Part D penalty is calculated
The penalty is 1% of the national base beneficiary premium times the number of full months you went without Part D or creditable coverage. The base premium is $38.99 in 2026 (Medicare.gov), and CMS has announced $41.33 for 2027 (CMS). For example, 20 uncovered months in 2026 means 20% of $38.99, about $7.80 a month added to your premium, rounded to the nearest $0.10. Because the base premium changes each year, the penalty can change too. See our full guide to the Part D late enrollment penalty.
The creditable coverage notice
Employers, unions and insurers that offer drug coverage to Medicare-eligible people must tell those members each year whether the coverage is creditable. CMS requires the notice before October 15 each year, and also when you join the plan or when the plan’s creditable status changes (CMS). The notice goes to active workers, people on COBRA, people with disabilities and retirees, including Medicare-eligible dependents.
- It usually arrives as a separate letter or as part of open-enrollment materials, often titled “Important Notice About Your Prescription Drug Coverage and Medicare.”
- Keep every notice. When you join a Part D plan later, the plan may ask whether you had creditable coverage. Your notice is your proof.
- If you can’t find it, ask your employer’s benefits office or plan for a copy.
- Plan sponsors also report their creditable status to CMS each year, within 60 days after the start of the plan year.
Creditable coverage and Part B: a different rule
Many people think creditable coverage also protects them from the Part B penalty. It doesn’t work that way. To delay Part B without a penalty, you generally need group health plan coverage based on current employment, yours or your spouse’s. Then you get a Special Enrollment Period that ends 8 months after the employment or the coverage ends, whichever happens first (Medicare.gov).
| Coverage | Delay Part D? | Delay Part B? |
|---|---|---|
| Employer plan from current job (yours or spouse’s), creditable drug coverage | Yes | Yes |
| Employer plan from current job, non-creditable drug coverage | No | Yes |
| COBRA | Yes, if the drug coverage is creditable | No; COBRA doesn’t give you a Part B Special Enrollment Period |
| Retiree coverage | Yes, if the drug coverage is creditable | No; retiree coverage isn’t based on current employment |
| Marketplace (individual) plan | Only if the drug coverage is creditable | No |
The Part B penalty is 10% of the standard premium for each full 12-month period you could have had Part B but didn’t, and it generally lasts as long as you have Part B. Read more in working past 65: Medicare, employer coverage, COBRA and HSA rules and Medicare when losing employer coverage.
What to do when your creditable coverage ends
- Join a Medicare drug plan or a Medicare Advantage plan with drug coverage within 63 days after your creditable coverage ends. Losing employer coverage gives you a Special Enrollment Period for this.
- If you’re also leaving a job-based plan, sign up for Part B within 8 months. Social Security uses form CMS-L564 for the employer to confirm your coverage; see CMS-40B and CMS-L564.
- If you have limited income, apply for Extra Help. People who qualify for Extra Help don’t pay a Part D late enrollment penalty.
- Compare plans for your specific drugs. Our guide to how Medicare Part D works walks through costs and the 2026 $2,100 out-of-pocket cap.
If you were charged a penalty you think is wrong
If your new Part D plan says you owe a late enrollment penalty but you had creditable coverage, you can ask for a review (reconsideration). Send your creditable coverage notices or a letter from your former plan. You can also ask for a reconsideration if you weren’t told whether your coverage was creditable. Follow the instructions in the letter your plan sends about the penalty, and meet the deadline it gives.
Frequently asked questions
What does creditable coverage mean for Medicare?
It means your prescription drug coverage is expected to pay, on average, at least as much as standard Medicare Part D coverage. It lets you delay Part D without a late enrollment penalty.
How do I know if my coverage is creditable?
Check the notice your employer, union or insurer sends each year before October 15. If you can’t find it, ask the plan or your benefits office.
Is COBRA creditable coverage for Medicare?
COBRA drug coverage can be creditable for Part D, but COBRA doesn’t let you delay Part B without a penalty.
Is an HSA plan creditable coverage?
It depends on the plan’s drug benefit. Some high-deductible plans are creditable and some aren’t, so check the notice. Note that you can’t contribute to an HSA once you’re enrolled in any part of Medicare; see HSA and Medicare.
Is Medicaid creditable coverage?
People with full Medicaid are enrolled in a Part D plan through Extra Help and don’t pay a late enrollment penalty.
Is the 63-day rule for each gap or in total?
It applies to any period of 63 or more days in a row without Part D or creditable coverage after your Initial Enrollment Period. Shorter gaps don’t trigger a penalty.
This article is general information, not legal, tax or individual insurance advice. Plan rules and costs can change each year, so confirm details with Medicare, Social Security or your plan. Medicare365 is not affiliated with or endorsed by the U.S. government or the federal Medicare program.