If you’re enrolling in Medicare, you may question whether you really need Part D prescription drug coverage. Beneficiaries pay a monthly premium for Part D, it may feel like an unnecessary expense if you don’t take any prescriptions. You may have other prescription benefits and wonder if you need Part D.
Skipping Part D coverage can be an expensive decision, depending on your situation. You may find yourself without insurance to cover medications if you suddenly become ill.
Then, when you finally do enroll, you may pay a Medicare Part D late enrollment penalty. This will be in the form of a higher premium for as long as you have Part D.
Medicare Part D Late Enrollment Penalty
When you first become eligible for Medicare, you have an initial seven-month enrollment period to sign up for coverage, including Part D. If you’re eligible because you are turning 65, your Initial Enrollment Period begins three months before your 65th birthday month and ends three months after your birthday month.
After that IEP, you’ll pay a Part D late enrollment penalty if you go without one of these types of prescription drug plans for 63 days or more:
- A Part D plan
- Prescription coverage through a Medicare Advantage (Part C) plan
- Any other Medicare plan that includes Medicare PDP coverage
- Another healthcare plan that includes prescription drug coverage that is at least as good as the coverage provided by Medicare.
Medicare Part D Late Enrollment Penalty Calculator
The Medicare Part D penalty is based on the number of months you went without PDP coverage. For each month without coverage, you will pay an additional premium of 1 percent of the current “national base beneficiary premium.”
For 2020, the average beneficiary premium is $32.74.
This is not a one-time penalty. You’ll pay it every month for as long as you have Medicare prescription coverage. Your Part D penalty will be rounded to the nearest $.10 and added to your Part D premium.
Since the penalty is always based on the current year’s national beneficiary premium, it may change or go up each year.
Part D late enrollment penalty calculation can be hard to figure out. So, here’s an example to show how this works.
Suppose your IEP ended and you waited 33 months to sign up for Part D. Your Part D penalty would be 33 percent of the national beneficiary premium, one percent for each of the 33 months you waited.
This would be calculated as $32.74 x .33 = $10.80. The Part D penalty is rounded to the nearest 10 cents.
You’ll pay this penalty in addition to your Part D Premium. The best way to avoid paying the Part D late enrollment penalty is to enroll in a Prescription Drug plan as soon as you become Medicare eligible.
Part D Penalty Cap
Since this penalty didn’t start until 2006, you can only be penalized starting from that year. The capped amount of months increases each month. So as of January 2020, the cap is 163 months. Which means you cannot be penalized more than $54.10. Amplicare has a great Part D penalty calculator.
Are there other Drawbacks to Waiting to Enroll in a Part D Plan
You can’t just enroll in Part D whenever you want. After your initial enrollment period ends, you can usually only enroll during the Annual Enrollment Period that runs from October 15th to December 7th each year.
That means that if you wait to sign up for Part D, you may find yourself paying full price for expensive medications if you suddenly become ill. It’s better to have coverage before you need it; you wouldn’t buy car insurance after a car accident, so, don’t wait to buy prescription coverage.
What if I already have Prescription Drug Coverage
If you already have coverage through an employer, union, or another source, you may not have to worry about the Part D penalty. The key is whether the coverage you now have is “creditable”. Creditable coverage is the same as, or better than, the benefits Medicare provides.
You will not accumulate any penalties during the time you have other creditable coverage. If you lose this coverage through no fault of your own, you should be eligible for a Special Enrollment Period. When you sign up within 63 days of losing coverage, you will not have to pay penalties.
You should receive a notice each year saying whether your coverage is creditable. Save this letter with your important papers – you may have to show it to Medicare to avoid a penalty.
Medicare Part D Late Enrollment Penalty Reconsideration
If you qualify for extra help, you may qualify for assistance paying the Part D penalty. Some lower-income beneficiaries have the penalty waived altogether. You can contact Social Security to apply for Medicare Extra Help.
We’re Here to Help
In choosing Medicare coverage, it’s important to plan to avoid penalties and minimize your costs. At MedicareFAQ, we are here to help.
We research the top plans in your area, answer questions, and give quotes on the best coverage for your situation. Call us at the number above, or click here to complete our rate form online.