In our previous post, What is the Medicare Part D Late Enrollment Penalty, we detailed why and when a Part D late enrollment penalty is assessed. Please review that post to get up to speed before reading on.
Now that you’re clear on what the Medicare Part D Late Enrollment Penalty is, what happens if you receive a penalty notice from your Part D prescription drug plan or Medicare Advantage plan that includes Part D? What actions do you need to take?
The answer depends on whether you had “creditable” prescription drug coverage that met or exceeded Medicare Part D minimum standards. As discussed in our previous post, not all health insurance plans have creditable prescription drug coverage. Just because you’re covered in a group health insurance plan through an employer doesn’t mean the drug benefits meet Medicare’s Part D standards. In fact, we see group health plans that have non-creditable drug coverage quite often.
Let’s break this down in two scenarios:
Scenario #1 – I DID Have Creditable Prescription Drug Coverage
If you had creditable prescription drug coverage elsewhere and delayed Part D enrollment, you WON’T be assessed a Part D late enrollment penalty. However, that doesn’t mean you won’t receive a late enrollment notice when you finally do enroll in Part D prescription drug coverage.
Here’s what happens when you enroll in a stand-alone Part D plan (or Medicare Advantage plan that includes Part D) AFTER your Initial Enrollment Period:
NOTE: It’s possible your Medicare drug plan will be able to confirm your prior creditable drug coverage behind the scenes. If that happens, you won’t receive the notice referenced next.
Declaration of Prior Prescription Drug Coverage
The Part D insurance carrier might send you a standardized letter alerting you of a possible gap in creditable prescription drug benefits. It should provide the date range in question, which usually starts the month after your Initial Enrollment Period until when you finally purchased Part D prescription drug coverage. You then have the opportunity to remove the penalty by completing and mailing a form to the Part D plan. You will need to provide this information:
The name of the Part D prescription drug plan (or Medicare Advantage plan) you just enrolled in.
Where you had creditable prescription drug coverage previously. There are several options, but the most common is the first on the list…through an employer-based group health plan.
Then enter the insurance carrier you were covered through, as well as the From and To dates for that coverage. If there is more than one carrier involved during the penalty time frame, be sure to add that information as well.
And be sure to sign and date the form where required…and submit the paperwork to the insurance plan. Each carrier has their own process, but typically you’ll have an option to mail it, fax it, and/or call to provide the information.
Once the plan receives your paperwork, they will then research further to determine if you did indeed have creditable prescription drug coverage.
Watch your mail closely after that, as you will be informed of the decision once the investigation is complete. It’s possible the insurance carrier might request additional documentation of your previous creditable drug coverage. In that scenario, you would need to get the creditable drug coverage notices from your employer for the calendar years in question.
Scenario #2 – I DIDN’T Have Creditable Prescription Drug Coverage
If you didn’t have creditable prescription drug coverage and didn’t enroll in a Part D plan during your Initial Enrollment Period in Medicare, you will owe a lifetime penalty (except those on Medicaid or currently approved for the Extra Help program).
The penalty is assessed and charged only after you actually enroll in a stand-alone Part D plan (or Medicare Advantage plan with Part D benefits). It’s calculated based on the number of months you are late enrolling in Part D.
Here’s an example of how the penalty is calculated in 2024 for a Medicare beneficiary enrolling in a Part D plan 10 months late:
2024 Part D National Base Premium = $34.70/mo
1% of $34.70 = $0.3470
Multiply $0.3470 by the number of months you are late enrolling ($0.3470 X 10)
2024 Part D penalty = $3.47/mo → rounded to the nearest ten cents → $3.50/mo
The penalty is assessed monthly…and for life…as long as you’re enrolled in Part D coverage! The constant factor will be that you were 10 months late in this example, but what will change is the Part D national base premium. That means that as the Part D national base premium increases, so will your Part D penalty. You can see more on this calculation HERE.
This particular topic is one of the most common sources of confusion for Medicare beneficiaries. Many delay Medicare Part D because they think their employer group health plan is sufficient, but often later find out about the penalty. This is why we recommend all Medicare eligible individuals should find out whether their existing health insurance has prescription drug benefits that meet the Medicare Part D minimum standards when first eligible. Knowing this up-front and taking the proper steps can help you avoid a lifelong penalty.
Reference Links
www.medicare.gov
Medicare Sign Up Periods
Extra Help
Part D Late Enrollment Penalty
Neither Medicare Mindset LLC nor its agents are connected with the Federal Medicare program
