When you become Medicare eligible, the Part D Late Enrollment Penalty is added to your Medicare Part D monthly premium when you fail to obtain “creditable” prescription drug coverage, including:
— A stand-alone Part D prescription drug plan
— A Medicare Advantage plan that includes Part D prescription drug coverage
— Employer group health coverage that includes creditable prescription drug coverage
— The Department of Veterans Affairs (VA)
To avoid the Part D late enrollment penalty when you’re first eligible for Medicare, you must obtain creditable prescription drug coverage during your Initial Enrollment Period (the 7-month time frame shown below), or within 63 days of losing creditable prescription drug coverage.
Creditable prescription drug coverage is drug coverage that meets or exceeds Medicare Part D minimum standards.
If you have prescription drug coverage through the VA, it’s considered creditable, so you don’t have to enroll in a Part D plan (no penalty). However, some Medicare beneficiaries still purchase a Part D prescription drug plan in the event the VA doesn’t cover a particular medication, or if they just want the flexibility to pick up certain drugs at a local pharmacy, rather than the VA.
But what about prescription drug coverage through your employer? Is it creditable?
Well, that depends. Each group health plan needs to confirm whether the drug coverage is creditable or non-creditable each year from the insurance carrier. Some plans are creditable, and some are non-creditable. Your employer is required to communicate this to you at least annually when the group renews health coverage, and at your request.
NOTE: This notice only pertains to prescription drug benefits. It’s commonly confused with a separate notice provided by employers stating you had creditable “medical” coverage through the employer group health plan. The medical benefits are not in question here, just the prescription drug side.
If your group health plan’s drug benefits are creditable, you can delay Part D enrollment (without penalty) and obtain a Part D prescription drug plan when you need it (i.e. within 63 days of when you lose the group coverage at retirement).
If your group health plan’s drug benefits are non-creditable, you can purchase a Part D prescription drug plan during your Initial Enrollment Period to avoid the penalty. If you don’t purchase a Part D prescription drug plan during your Initial Enrollment Period, the penalty will start to accumulate. 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). The penalty is 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, and also 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.
So the big lesson here is you need to either pick up a Part D prescription drug plan when you’re first eligible, or get 100% confirmation that your other prescription drug benefits are creditable. Because otherwise, you might begin to accumulate a life-long penalty.
Our next blog post will describe how to remove a Part D late enrollment penalty when it’s incorrectly being charged in the first place. Be on the lookout.
We are always here to help you with these kinds of issues. Actually, we suggest addressing this BEFORE it becomes an issue. Contact us HERE for help.
Neither Medicare Mindset LLC nor its agents are connected with the Federal Medicare program.