The Medicare Rights Center recently issued a brief to show the many complex issues of knowing when to enroll in Medicare Part D drug coverage.
The brief in particular highlights the importance of educating yourself about this important coverage, as failing to sign up in a timely fashion can saddle you with a monthly penalty for the rest of your life.
Medicare members can access prescription drug coverage by simply enrolling in Part D plans, which are hosted by private insurers. Those who are eligible for Medicare benefits but do not enroll, will face a penalty unless they currently hold equal or greater coverage from a private entity.
The late enrollment penalty is an amount that’s permanently added to your Medicare drug coverage (Part D) premium. You may owe 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.
Medicare calculates the penalty based on the number of months you went without eligible coverage. You pay 1% of that year’s national average Part D premium, what the Centers for Medicare and Medicaid Services (CMS) calls the “national base beneficiary premium,” multiplied by the number of months you were without creditable drug coverage since enrolling in Part A or Part B.
One important thing: The Part D penalty has no cap.
Example: For 2022, the national average Part D premium is $33.37 a month. If you went 34 months without creditable coverage, your penalty would be $11.40.
The calculation: 34 x 0.3337 = $11.35. But the penalty is always rounded up to the nearest 10 cents.
Medicare adds this amount to your regular Part D premium each month. The penalty lasts for as long as you have Part D coverage, and the amount is recalculated when the national average premium changes each year. In other words, as the monthly premium increases over time, so will your Part D penalty.
How do I avoid a Part D penalty?
If you already have prescription drug coverage, every September you should receive a letter from your employer or insurance plan that identifies whether your plan is considered “creditable coverage” or as good as Medicare Part D.
If you suddenly are without drug coverage, you’ll receive a two-month special enrollment period during which you can sign up for a Part D plan without incurring the penalty.
If you receive this letter, keep it in your health insurance files as proof that you have creditable coverage when it’s time to enroll. If you have prescription coverage from another source that is considered creditable, you won’t be subject to the penalty.
Creditable coverage includes coverage from:
- An employer,
- Tricare,
- The Department of Veterans Affairs, or
- Another source.
You may also be able to avoid penalties if:
- You receive Extra Help, a federal program that helps people with low incomes and assets pay Part D premiums and out-of-pocket costs.
- You have been living abroad or have been in prison. In both of these situations, you can’t obtain Part D drug coverage. If you sign up for Part D coverage within two months of returning to the U.S. or your release from incarceration, you can avoid the penalty.
- You delayed enrolling in Medicare parts A and B at age 65, so you weren’t eligible to buy Part D yet. Because Part D requires enrollment in either part, you can’t be penalized for late enrollment.
People who work for an employer with 20 or more staff and continue working after age 65 can delay enrolling in Medicare.
This can be especially beneficial if they are enrolled in a high-deductible health insurance plan with an attached health savings account. An HSA allows an enrollee to make pretax contributions that they don’t have to spend in the year they deposit them, thus enabling employees to save for future medical expenses.
This is important as you are barred from making HSA contributions after you sign up for Medicare.
If you need assistance with Medicare please contact us at 720-985-1213 to schedule a no-obligation consultation.
