Medicare members can enjoy the benefit of prescription drug coverage by simply enrolling in Part D plans, which are hosted by private insurers.

However, there’s a catch: If you don’t sign up for a Part D plan when you first sign up for Medicare, you will face lifelong penalties unless you are still enrolled in equal or greater coverage from a private health plan, such as one sponsored by your employer.

You may have to pay a late enrollment penalty if at any time after your Initial Enrollment Period is over, there’s a period of 63 or more days in a row when you don’t have Medicare drug coverage or other creditable prescription drug coverage.

You’ll generally have to pay the penalty for as long as you have Medicare drug coverage.

The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage.

Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($34.70 in 2024) times the number of full, uncovered months you didn’t have Part D or creditable coverage. The monthly premium is rounded to the nearest $0.10 and added to your monthly Part D premium.

The national base beneficiary premium may increase or decrease each year, so your penalty amount may also rise or fall from year to year.

Example

Ann has Medicare, and her first chance to get Medicare drug coverage (during her Initial Enrollment Period) ended on July 31, 2021. She doesn’t have prescription drug coverage from any other source.

She didn’t join a Medicare drug plan by July 31, 2021, and instead joined during the Open Enrollment Period that ended December 7, 2023. Her Medicare drug coverage started January 1, 2024.

Since Ann was without creditable prescription drug coverage from August 2021 through December 2023, her penalty in 2024 is 29% (1% for each of the 29 months) of $34.70 (the national base beneficiary premium for 2024), or $10.06 each month.

Since the monthly penalty is always rounded to the nearest $0.10, she will pay $10.10 each month in addition to her plan’s monthly premium.

Tips

Don’t be like Ann. When you first become eligible, Medicare recommends enrolling in a Part D plan immediately unless equal or better creditable coverage is already held.

Creditable prescription drug coverage could include coverage from a current or former employer or union, TRICARE, Indian Health Service, the Department of Veterans Affairs or individual health insurance coverage.

If your employer is sponsoring a plan for prescription coverage, you should contact someone in human resources and ask them to clarify whether the coverage is creditable for Part D.

Always ask for this information if it is not provided. Never assume that all prescription drug coverage is creditable. Also, keep proof that the coverage is creditable in the event that it must be provided for status proof.

Finally, don’t forget to enroll in Part D if you lose your other creditable coverage. Your plan is required to tell you each year if your non-Medicare drug coverage is considered creditable coverage. This is important.

As mentioned above, if you go 63 days or more in a row without Medicare drug coverage or other creditable prescription drug coverage, you may have to pay a penalty if you sign up for Medicare drug coverage later.

For questions about eligibility and creditable prescription drug plans, give us a call.

Article Source: https://www.insurancenewsletters.com/