How to Avoid the Part D late Enrollment Penalty

Once you turn 65 it is important to maintain what Medicare calls “creditable prescription drug coverage”.  So this begs the big question, Do you have creditable prescription drug coverage?  If not you could face a lifetime tax known as the Part D late enrollment penalty.

Creditable prescription drug coverage is defined as, drug coverage that’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage.  If your drug plan is not providing this level of coverage, why would anyone want to stay under that plan if they qualify for a Part D plan that offers broader coverage.

Places that offer creditable coverage are from your current or former employer or union, from TRICARE, the Indian Health Service, or the Department of Veterans Affairs.  I am personally covered under the Department of Veterans Affairs prescription drug coverage and I love it.  So I will personally plan to keep this coverage once I become eligible for Part D coverage.

If you do not have creditable coverage, you may want to join a Medicare Part D drug plan now, to avoid the never ending increasing Part D late enrollment penalty, even if you don’t use a lot of prescription drugs. 

How to avoid the Part D late enrollment penalty:

  • Join a standalone Medicare Prescription Drug Plan when you first become eligible.  This option is available if you are enrolled into Original Medicare with a Medigap plan or Medicare Supplement Plan.
  • Join a Medicare Advantage Plan that includes Part D coverage.
  • Don’t go more than 63 days without a Medicare “creditable” drug plan
  • Tell your plan about any drug coverage you had in place when you are asked about it
  • Obtain from your current/prior plan, a letter on their letterhead stating when your coverage bagan and ended

How do I know if my prescription drug coverage is considered creditable for Medicare?

While you may have never really noticed or cared to notice, your prescription drug plan is required to let you know each year if your drug coverage is considered creditable coverage. They will send you this information in a letter, or draw your attention to it in a newsletter or other piece of correspondence. 

You can also call your health insurance company, to confirm if your current plan offers Medicare creditable coverage. 

It will be important that you keep this information in a safe place, because you may need it if you join a Medicare drug plan later and want to avoid the Part D late enrollment penalty. 

If you have creditable prescription drug coverage when you first become eligible for Medicare, generally you can keep it without paying the late enrollment penalty if you sign up for Part D later.

The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage. In general, you’ll have to pay this penalty for as long as you have a Medicare drug plan.  

This is why it is so important to maintain creditable coverage, so you don’t have a lifetime of penalties that you will have to pay.  

Give us a call to discuss your Medicare Insurance options 562-735-3553 x1