How Can I Avoid a Part D Late Enrollment Penalty?
No one wants to pay extra fees for their healthcare. Fortunately, there are ways to steer clear of the late penalty when enrolling in Medicare Part D Prescription Drug Plans. Let’s break those down.
What you’ll learn:
|What is the Part D Late Enrollment Penalty?||Jump to|
|How Does Medicare Figure out the Part D Late Penalty?||Jump to|
|How Can I Avoid the Part D Late Enrollment Penalty?||Jump to|
|What Are the Requirements to Enroll in Medicare Part D?||Jump to|
|When Can I Sign up for Medicare Part D?||Jump to|
|Medicare Advantage and Part D||Jump to|
What is the Part D Late Enrollment Penalty?
If you’re enrolled in a Medicare plan and don’t have Part D or some other creditable prescription drug coverage for 63 or more days in a row after your Part D Initial Enrollment Period ends, you may find yourself owing a late penalty.
The penalty amount changes each year, and the exact amount is related to the amount of time you went without prescription drug coverage, whether it was Part D or from some other source.
Known as the Part D Enrollment Penalty, this is tacked on to your monthly Prescription Drug Plan premium for as long as you carry Medicare drug coverage – even if you change your plan. Keep in mind that creditable prescription drug coverage pays at least as much as Medicare Part D. If you don’t know if your coverage is considered creditable, contact your provider.
How Does Medicare Figure out the Part D Late Penalty?
If you’re subject to the penalty, it’s calculated when you first enroll in Part D. For each month you haven’t had a Prescription Drug Plan or other creditable coverage, you’ll typically be charged 1% of what’s known as the national base beneficiary premium. In 2022, that premium is $33.37 per month.1
Your penalty is rounded to the nearest $0.10 and then added to your monthly Part D premium.1 For example, 1% of $33.37 is about $0.34. That might not sound like a lot, but let’s say you go 12 months without enrolling. When you do enroll, your premium could be $4 higher a month. That’s nearly $50 in late penalty frees a year which can add up to hundreds of dollars over the lifetime of your coverage.
How Can I Avoid the Part D Late Enrollment Penalty?
Medicare suggests three ways to avoid the Part D penalty. These are:
Enrolling in Medicare Part D when you’re first eligible
Your initial enrollment period kick off three months before your 65th birthday and concludes three months after your turn 65. Enrolling makes sense even if you’re not on any medications now. It’s possible to find plans with negligible or even no monthly costs.
Enroll in Medicare drug coverage if you lose other creditable coverage
If you lose other creditable drug coverage such as employer-provided benefits, TRICARE, or individual coverage, enroll in Medicare Part D. Your provider will help you determine whether your non-Medicare coverage is considered creditable.
Maintain records of past creditable drug coverage
And make sure your Medicare plan knows about it. If you don’t do this, you may find yourself facing a penalty. Creditable coverage can come from a current or former employer or trade union as well as one of these groups:
- Federal Employee Health Benefits Program
- TRICARE, or military health benefits
- Civilian Health and Medical Program of the Department of Veterans Affairs
- Indian Health Services
- Your spouse’s employer or a COBRA plan
What Are the Requirements to Enroll in Medicare Part D?
You can’t just sign up for Medicare Part D without enrolling in Original Medicare. You must have Part A – hospital, facility, and home care – as well as Part B, which covers medically necessary services and preventative services. The deductibles for 2022 are $1,556 for Part A and $233 for 2022.2
You’re eligible for Original Medicare if one of these situations applies to you:
- You’re 65 and eligible to enroll in Medicare parts A and B.
- You’ve gotten Social Security disability payments for at least two years – a waiting period that’s waived if you are diagnosed with amyotrophic lateral sclerosis (ALS), in which case you are eligible for Medicare Part D the first month you start to get disability.
- You are diagnosed with end stage renal disease or kidney failure and must have either dialysis or a kidney transplant.
- You are under the age of 20 and have at least one parent eligible for Social Security.
In addition to enrolling three months before your 65th birthday to three months after you turn 65, you are also eligible for Medicare Part D if you are not 65 but have a qualifying disability that entitles you to Social Security or Railroad Retirement Disability benefits. In this instance, your eligibility window spans form three months before the 25th month of benefit payments until three months after your 25th month of getting benefits.
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When Can I Sign up for Medicare Part D?
You must have Original Medicare Parts A and B to sign up for a Medicare Part D Plan.
There are several times you can sign up:
- During your Initial Enrollment Period for Medicare.
- If you sign up for Original Medicare during the General Enrollment Period, which is from January 1 through March 31, then you can enroll in Part D from April – June, with coverage beginning July 1.
- If you leave a Medicare Advantage Plan during the annual Medicare Advantage open Enrollment Period, which is from January – March, you can sign up for Part D after returning to Original Medicare.
- You can also enroll in Part D during the Medicare Annual Enrollment Period, which is form October 15 through December 7, with coverage beginning January 1.
What About Medicare Advantage?
You have another option when it comes to covering prescription drug costs on Medicare: replace your Original Medicare with a Medicare Advantage Plan that includes prescription drug coverage.
This is an all-in-one option that covers not only your prescriptions but also the hospital and medical services usually covered by Parts A and B, as well extra benefits such as vision, dental and hearing. Recently, benefits like transportation, meal delivery and fitness memberships have become popular additions to Medicare Advantage plans as well.
All these services come at little to no cost, with plans starting at $0 a month.
They can, however, come with a limited network of providers, the possibility of higher out-of-pocket costs and a lack of coverage while traveling.
Medicare Advantage vs Part D
Part D Prescription Drug Plans are stand-alone plans which means you get to keep your Original Medicare, allowing you to see any provider that accepts Medicare instead of being limited to a network like with Medicare Advantage.
It also allows you to enroll into a Medigap, or Medicare Supplemental Insurance plan which isn’t allowed if you enroll into an Advantage Plan.
Part D plans do usually come with higher monthly premiums than Advantage plans, and if you go this route, you may also have to consider separate premiums for your vision, dental and hearing coverage since they’re not covered by Original Medicare.
What Else Should I Keep in Mind?
Original Medicare does not cover prescription drugs – that’s the job of Part D. While you can tack on private drug coverage to your Original Medicare or opt for a Part C plan that provides this coverage, the right choice is going to depend on many factors.
Also, remember that if your chosen plan doesn’t suit your needs, you can switch during the next Medicare Annual Enrollment Period – but, depending on when you enroll, you’re committed for up to a year.
Finally, the Part D Enrollment Late Penalty is for the foreseeable future. For this reason, it’s important that you plan ahead and do your research so that you enroll at the appropriate time. This is one of the strongest ways you can avoid the penalty.
If you’re wondering about Part D options in your area, we’ve got answers. Don’t let your uncertainty lead to late enrollment penalties. Call the number on this page to speak to an Ensurem licensed agent. They can help you determine the best way to avoid the late penalties – whether that be though a Part D or Medicare Advantage Plan.
1Medicare.gov. “Part D Late Enrollment Penalty” Accessed February 9, 2022.
2Medicare.gov. “Medicare Costs at a Glance.” Accessed February 9, 2022.
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Denise Austin, 65, Ensurem Ambassador
Best-Selling Author, Creator of Fit Over 50 Magazine
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