In our previous post, What is the Medicare Part D Late Enrollment Penalty, we detailed why and when a Part D late enrollment penalty is assessed. Did you miss it? Please review that post to get up to speed before reading on.
Now that you’re clear on what the Medicare Part D Late Enrollment Penalty is, what happens if you receive a penalty notice from your Part D prescription drug plan or Medicare Advantage plan that includes Part D? What actions do you need to take?
The answer depends on whether you had “creditable” prescription drug coverage that met or exceeded Medicare Part D minimum standards. As discussed in our previous post, not all insurance plans have creditable prescription drug coverage. Just because you’re covered in group health insurance plan through an employer doesn’t mean the drug benefits meet Medicare’s Part D standards. In fact, we see group health plans that have non-creditable drug coverage quite often.
Let’s break this down in two scenarios:
Scenario #1 – I DID Have Creditable Prescription Drug Coverage
If you had creditable prescription drug coverage elsewhere and delayed Part D enrollment, you WON’T be assessed a Part D late enrollment penalty. However, that doesn’t mean you won’t receive a late enrollment notice when you finally do enroll in Part D prescription drug coverage.
Here’s what happens when you enroll in a stand-alone Part D plan (or Medicare Advantage plan that includes Part D) AFTER your Initial Enrollment Period:
The Part D insurance carrier will send you a standardized letter alerting you of a possible gap in creditable prescription drug benefits. It should provide the date range in question, which usually starts the month after your Initial Enrollment Period until when you finally purchased Part D prescription drug coverage. You then have the opportunity to either call or complete a form to appeal. Either option is fine. Provide them with where you had the creditable coverage (i.e. employer’s name, VA, TriCare, etc) and the insurance carrier(s) involved during that time frame. They will then research further to determine if you did indeed have creditable prescription drug coverage.
Be sure to watch your mail closely after that, as you will be informed of the decision once the investigation is complete. If possible, keep the creditable drug coverage notices you received from your employer or other provider during that time frame.
Scenario #2 – I DIDN’T Have Creditable Prescription Drug Coverage
If you didn’t have creditable prescription drug coverage and didn’t enroll in a Part D plan during your Initial Enrollment Period in Medicare, you will receive a penalty.
The penalty is assessed and charged only after you actually enroll in a stand-alone Part D plan (or Medicare Advantage plan with Part D benefits). It’s calculated based on the number of months you are late enrolling in Part D.
Here’s an example of how the penalty is calculated in 2019 for a Medicare beneficiary enrolling in a Part D plan 10 months late:
— 2019 Part D National Base Premium = $33.19/mo
— 1% of $33.19 = $0.3319
— Multiply $0.3319 by the number of months you are late enrolling ($0.3319 X 10)
— 2019 Part D penalty = $3.32/mo → rounded to the nearest ten cents → $3.30/mo
The penalty is assessed monthly, for life! The constant factor will be that you were 10 months late in this example, but what will change is the Part D national base premium. That means that as the Part D national base premium increases, so will your Part D penalty.
This particular topic is one of the most common sources of confusion for Medicare beneficiaries. Many delay Medicare Part D because they think their employer group health plan is sufficient, but often later find out about the penalty. This is why we recommend all Medicare eligible individuals should find out whether their existing health insurance has prescription drug benefits that meet the Medicare Part D minimum standards when first eligible. Knowing this up-front and taking the proper steps can help you avoid a lifelong penalty.
Contact us if you have any questions about removing your late enrollment penalty or preventing one from the start.
Neither Medicare Mindset LLC nor its agents are connected with the Federal Medicare program.