Medicare prescription drug coverage is one of the most frustrating parts of Medicare for many. With confusing tiers and the dreaded donut hole, many Medicare beneficiaries would love to skip it.
For those that don’t take prescriptions, it’s equally as annoying; after all, who wants to pay for something they aren’t using? While it may seem like a good idea not to take a Part D drug plan when you’re not taking prescriptions, you need to know you can and will be penalized.
What is the Medicare Part D Late Enrollment Penalty?
The Medicare Part D Late Enrollment penalty will apply to anyone eligible for Medicare Part D drug coverage who chooses not to enroll. The penalty is a 1% per month that compounds for each uncovered month you don’t enroll or have creditable drug coverage.
The penalty is based on the average national base beneficiary premium of the drug plans for the year. The late-enrollment penalty is permanent and will continue to increase until you have prescription drug coverage through Medicare or other creditable drug coverage.
For Example, if you go four years without drug coverage. The number of months you have a 1% penalty would be 48. In this example, your penalty would be 48%.
Let’s assume the national base beneficiary premium is $31.50 a month. Your penalty would be $30 x .48 = $14.40.
Now, if your drug plan has a $10 monthly part D premium, you would be paying $24.40 a month for your drug plan. That $14.40 would stay with you no matter the drug plan you select.
Avoiding the Medicare Part D Late Enrollment Penalty
There are a few things to safeguard yourself from the Part D Late Enrollment Penalty.
You can enroll in a Medicare prescription drug plan during your Initial Enrollment Period. You can choose either a Medicare stand-alone Part D plan or a Medicare Advantage that includes drug coverage.
Likewise, suppose you have creditable drug coverage, such as prescription coverage from the VA or a retiree plan. In that case, you can elect not to enroll in a Medicare drug plan without receiving a penalty.
What is Creditable Drug Coverage?
Creditable coverage is defined as coverage that’s as good or better than the Medicare standard model. Some examples of creditable coverage for Part D are listed below.
- Veterans Affairs
- Indian Health Services
- Employer-sponsored group healthcare
- Union group health insurance
Remember, these other health plans are creditable prescription drug coverage for Medicare Part D. The insurance options listed above may not be considered creditable for the other portions of Original Medicare.
When can you enroll in Medicare Part D coverage?
You can’t enroll in Medicare Part D at any time. You must enroll during a valid enrollment period.
The Initial Enrollment Period is when you first become eligible for Medicare. You’re allowed to enroll three months before the month of your 65th birthday and up to three months after.
The Annual Enrollment Period allows you to make changes between October 15th and December 7th.
If you receive your prescription coverage through a Medicare Advantage Plan, you can change the Medicare Advantage Open Enrollment Period. This enrollment period runs from January 1st to March 31st annually.
Suppose you’re outside of these enrollment periods. In that case, you may qualify for a Special Enrollment Period that allows you to enroll or change your Part D coverage.
Can I get the Medicare Part D Late Enrollment Penalty removed or reduced?
The Part D LEP is a permanent penalty for most beneficiaries. There are only a few ways that will remove or reduce the penalty.
- You qualify for a new Initial Enrollment Period. This enrollment period usually occurs for people that start their Medicare before age 65 due to disability or a qualifying health condition.
- Your income is low enough to qualify you for the Extra Help program. Suppose your income is below the Low-Income subsidy program’s threshold. In that case, Social Security will waive your late enrollment penalty if you receive Extra Help.
Appealing the Medicare Part D Late Enrollment Penalty
If you feel that you should not have an LEP or that the amount is incorrect, you’re entitled to file for reconsideration. Social Security will include instructions to appeal will be provided in your determination letter from Social Security.
You must file the appeal promptly. You’re given 60 days from the date you receive your determination letter. If you don’t file within 60 days, you’ll be required to provide a written explanation of why you sent it in late.
You can appeal the determination if you feel you had creditable coverage during the period you’re being penalized or if you believe the penalty amount is incorrect. Make sure you include the Request for Reconsideration form as well.
Filing for reconsideration doesn’t guarantee that your LEP will be removed or lowered.
What is the maximum Part D late enrollment penalty?
There is no maximum for the Part D LEP. The penalty continues to compound monthly until you enroll in a prescription drug plan or creditable coverage.
How long does the Medicare Part D penalty last?
The Medicare Part D LEP continues indefinitely unless you become eligible for the Low-Income subsidy program.
How do I avoid the late enrollment penalty for Part D?
There are two ways to avoid the Medicare Part D late enrollment penalty. Enroll in a Medicare Prescription Drug Plan when you’re first eligible, or be enrolled in another creditable drug plan.
Is there a grace period for Medicare Part D?
You must enroll in a Medicare Part D Prescription Drug Plan within two months of eligibility for prescription coverage unless you have other creditable coverage.
What is the penalty if I enroll in a Medicare Part D plan before my 65th birthday?
If you started Medicare before 65 and have an LEP, you will get a new Initial Enrollment Penalty the month you turn 65. The new IEP will reset the Medicare Part D Late Enrollment Penalty.
What is the penalty for Medicare Part D late enrollment?
1% for every month you’re eligible and don’t have creditable coverage. The LEP compounds monthly and is based on the average standard Medicare Part B monthly premium. In , the standard monthly premium is $31.50.
Is there a cap on the Medicare Part D penalty?
No! The penalty will continue to increase until you enroll in a Medicare prescription drug plan.
Is there a maximum penalty for Part D?
No. The penalty will continue to accrue for every uncovered month. It will stop increasing once you start coverage.
Get Help with Medicare Prescription Drug Plans to avoid the LEP
We understand that prescription drug insurance plans sometimes don’t make sense. Still, we’re here to help you avoid penalties or negative consequences. Whether you’re looking for the cheapest plan because you’re not taking any prescriptions or you have several, we can help.
Our licensed insurance brokers specialize in Medicare. We can review your situation and scripts, compare what’s available in your area, and then guide you through the enrollment process.
For assistance, give us a call or fill out our online request form. Our Agents are here to help!