Is Medicare Part D Optional?
Whether you qualify for Medicare by turning 65 years of age, through disability or by having a condition like Lou Gehrig’s disease, you may have the option to enroll into Medicare Part A and/or Part B. You also need to be an American citizen or permanent legal resident of at least five continuous years to qualify for Medicare.
Depending on your work history and how you qualify, you may be automatically enrolled or need to manually enroll. But one thing people often wonder about is how they obtain Medicare Part D, which is prescription drug coverage and doesn’t automatically come with Original Medicare.
Medicare Part D benefits are available from either a stand-alone Medicare Prescription Drug Plan or a Medicare Advantage Prescription Drug plan, which combines Original Medicare (Part A and Part B) benefits with prescription drug coverage. Both types of plans are administered by private insurance companies, and specific benefits and prices vary depending on the service area you live in.
Is Medicare Part D optional? You’re not required to enroll into a Medicare Part D Prescription Drug Plan. However, if you go without creditable prescription drug coverage for 63 or more days in a row, you may have to pay a late-enrollment penalty if you enroll into a Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan later.
Read below to find out more about what kinds of coverage can help you avoid this penalty, when you can enroll in a Medicare Part D Prescription Drug Plan or Medicare Advantage Prescription Drug plan, and other information regarding the late-enrollment penalty.
What is creditable prescription drug coverage?
If you have health insurance in addition to Medicare, this might include creditable drug coverage. The plan must tell you each year whether or not the prescription drug coverage is creditable, meaning it covers at least as much, on average, as Medicare’s standard prescription drug coverage does. Some common examples of creditable coverage include (but are not limited to) health insurance from:
- Employer group coverage or union plans
- United States Department of Veterans Affairs (VA)
- Indian Health Service (IHS)
You can continue to use this prescription drug coverage alongside your Medicare benefits without penalty, as long as it’s creditable.
When can you enroll in Medicare Part D?
To enroll into a Medicare Part D Prescription Drug Plan, you need to have either Medicare Part A or Part B, and you have to live in the service area of the plan you choose. If you’re eligible for Medicare because of age, your seven-month Initial Enrollment Period for Part D usually takes place at the same time as your Initial Enrollment Period for Part B, starting three months before your 65th birthday, including your birthday month, and ending three months later. If you qualify for Medicare through disability, you’ll get a subsequent Initial Enrollment Period for Part D when you turn 65 years of age.
The Medicare Part D late-enrollment penalty may apply if you enroll any time after your Initial Enrollment Period for Part D and go without creditable prescription drug coverage for more than 63 days in a row. If you don’t enroll in Medicare Part D when you’re first eligible, your next opportunity will be during the Annual Election Period that occurs from October 15 to December 7 of every year. During this time, you can enroll into a stand-alone Medicare Prescription Drug Plan if you have Original Medicare or get drug coverage through a Medicare Advantage Prescription Drug plan. You can also use this period to switch plans or disenroll from your plan.
Another time you may be able to make changes to your Medicare Part D coverage is during the Medicare Advantage Disenrollment Period, which runs from January 1 to February 14 annually. If you disenroll from your Medicare Advantage plan and return to Original Medicare, you can also use this period to enroll into a stand-alone Medicare Prescription Drug Plan, since Original Medicare doesn’t include most prescription drug benefits. You can’t use the Medicare Advantage Disenrollment Period to make other types of Medicare plan changes.
Outside of these periods, you can’t make changes to your Medicare Part D coverage unless you qualify for a Special Election Period. Certain situations allow you to make changes outside of the regular periods and may include, but isn’t limited to, moving out of your plan’s service area, losing Medicaid eligibility, or moving into a nursing home.
What is the Medicare Part D late-enrollment penalty?
If you’ve gone 63 consecutive days without creditable prescription drug coverage, either because you didn’t enroll when you were first eligible or because you lost your creditable coverage and didn’t get new coverage in time, then you may have to pay a late-enrollment penalty when you do enroll into Medicare Part D.
The Medicare Part D late-enrollment penalty is added to the premium of the Part D Prescription Drug Plan you enroll into. Your Medicare Prescription Drug Plan determines this penalty by first calculating the number of uncovered months you were eligible for Medicare Part D, but didn’t enroll into a Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan. Your Medicare Prescription Drug Plan will then ask you if you had creditable prescription drug coverage during this time. If you didn’t have creditable drug coverage for 63 days in a row, the Medicare Prescription Drug Plan must report the number of uncovered months to Medicare.
For example, let’s say you disenrolled from your Medicare Prescription Drug Plan effective February 29, 2018, then decided to enroll into another Medicare Prescription Drug Plan during the Annual Election Period, for an effective date of January 1, 2019. This means you didn’t have creditable drug coverage from March 2018 through December 2018, which adds up to 10 uncovered months.
Currently, the late-enrollment penalty is calculated by multiplying 1% of the “national base beneficiary premium” ($35.02 in 2018) times the number of full, uncovered months that you were eligible but didn’t join a Medicare drug plan and went without other creditable prescription drug coverage . This number is then rounded to the nearest $.10 and added to your Medicare Prescription Drug Plan monthly premium cost. The “national base beneficiary premium” may increase each year, so the total of your late-enrollment penalty can also increase each year.