What is the Medicare Part D Late Enrollment Penalty?
Summary: Did you know there’s a Medicare Part D late enrollment penalty? It could make your Part D premium higher. Understand the Part D penalty and how you might avoid it.
When does the Medicare Part D Late Enrollment penalty apply?
The Medicare Part D late enrollment penalty doesn’t apply to everyone. If you never sign up for a Medicare prescription drug plan, you’ll never have to pay the Part D penalty.
What if you decide not to sign up for Part D at first, but then a few years later, you have health problems? Your doctors might prescribe medications to treat your health condition. Then you might decide you need Medicare Part D coverage. That’s when you might find yourself facing the Part D penalty.
Suppose you sign up for a Medicare prescription drug plan, and it’s been at least a few months since you qualified for such a plan. You were first eligible for a plan when you were first enrolled in Medicare Part A and/or Part B, during your Medicare Initial Enrollment Period (IEP).
Start the clock at the end of your IEP. You will have to pay the Part D penalty if you go 63 or more days in a row without one of these:
- A stand-alone Medicare Part D prescription drug plan
- A Medicare Advantage prescription drug plan
- Another Medicare plan that includes prescription drug coverage
- Creditable prescription drug coverage from another source, such as employer-based coverage
To be creditable, the plan must pay at least as much as the standard prescription drug coverage offered by Medicare. Some health plans that may meet these criteria include:
- Veteran’s (VA) benefits
- Federal Employee Health Benefits (FEHB)
- TRICARE (military health benefits)
- Benefits through Indian Health Services
How is the Medicare Part D late enrollment penalty calculated?
Medicare figures the Part D late enrollment penalty using 1% of the national base beneficiary premium. Medicare multiplies this 1% by the number of months you did not have creditable prescription drug coverage.
For example, if you went without creditable prescription drug coverage for four years (48 months) in 2019, your penalty would be calculated like this.
- Start with 1% of the national base beneficiary premium for 2019: $ 19 x .01= $.33 (or 33 cents).
- Multiply by the number of months you didn’t have creditable coverage. $.33 x 48 = $15.84.
This number is always rounded to the nearest 10 cents, so it’s $16.
In this case, you would pay $16 on top of your regular premium every month. But it could get higher year by year, since the national base premium may go up.
The Medicare Part D late enrollment penalty is permanent. You will pay the penalty as long as you have prescription drug coverage under Part D. You will not have to figure out the amount yourself. The information is sent to your Medicare prescription drug plan. Your plan will then send the information to you.
How can I avoid the Medicare Part D late enrollment penalty?
Since the penalty is permanent, you may want to avoid the Medicare Part D late enrollment penalty completely. There are different ways to do this.
First, understand that you can sign up for either a stand-alone Medicare Part D prescription drug plan, or a Medicare Advantage prescription drug plan. You have set times when you can enroll in one of these plans. Here’s how you can avoid the Part D late enrollment penalty.
- Get a Medicare prescription drug plan as soon as you are eligible for Medicare. Eligibility typically begins three months before the month you qualify for Medicare, and goes for three months after that.
- Do not go sixty-three days without creditable prescription drug coverage. This coverage can come from a Medicare prescription drug plan or another creditable prescription drug plan. Keep the information about your plan in case you need to show Medicare you were covered.
- Medicare may request information about your creditable coverage. If they do, complete the form and send it back promptly. This saves you from having to appeal a Medicare Part D late enrollment penalty later.
You could have to pay the Medicare Part D late enrollment penalty for many years. By understanding why it happens, you can take steps to avoid it. Start comparing plans right now – just enter your zip code on this page.