This report presents findings from the Medicare Part D late enrollment penalty demonstration, which encouraged enrollment in Part D among low-income beneficiaries by eliminating the penalty for certain Medicare beneficiaries in the low-income subsidy program and those living in areas affected by Hurricane Katrina. The demonstration benefitted a small but significant number of low-income Medicare Part D beneficiaries who might not have joined the program if they had been required to pay a late fee. The increased federal costs of prescription drugs among beneficiaries induced to enroll because of the demonstration waiver were offset by a reduction in medical services among the elderly.