A person enrolled in a Medicare Drug plan (called Part D) may owe a late enrollment penalty if he or she goes without Part D or creditable prescription drug coverage for any continuous period of 63 days or more after the end of his or her initial enrollment eligibility period for Part D coverage.
Generally the late enrollment penalty is added to the person’s monthly Part D premium for as long as he or she has Medicare prescription drug coverage, even if the person changes his or her Medicare drug plan.
The late enrollment penalty depends on how long the person went without creditable prescription drug coverage.
Creditable prescription coverage is coverage that’s expected to pay on average, at least as much as Medicare’s standard prescription drug coverage. Employer and union plans must send their Medicare eligible members an annual notice explaining how their group drug coverage compares to Medicare to determine if it is creditable.
Often times this requirement is overlooked by the H.R. department at work.
Medicare calculates the late enrollment penalty which is 1% of the national base beneficiary prescription premium for each full month the person didn’t have creditable coverage. The national base premium changes every year and in 2017 it was $35.63.
Recently a prospective Medicare beneficiary called and asked to be enrolled in Part D but was unaware there could be a penalty. The client continued to remain on her employer’s group prescription plan when she was first eligible to enroll in a Part D prescription plan but failed to check to see if it was creditable (as good or better than what Medicare offered).
To her surprise, I had to inform her she owed a penalty of $17.10 added to the monthly premium of $27.20 offered by Silver Script, the insurance provider. The
client’s group plan was not creditable for 48 months before she joined Medicare, and here’s how Medicare calculated her late penalty.
48 months at 1 % penalty per month = .48 (48% penalty)
48% x $35.63 (2017 base beneficiary premium = $17.10
$17.10= Ms. Client’s monthly late enrollment penalty for 2017.
Since the base premium changes every year, Ms. Client will be assessed a penalty for life based on the current base monthly beneficiary premium from the time she first enrolled in Part D which increased from $34.10. In 2016 to $35.63 in 2017.
Her final totals to enroll in a Part D Plan included the following:
$27.20 per month paid to Silver Script Insurance directly
$17.10 per month paid directly to Medicare
$44.30 per month or about $205.20 more ($17.10 x 12) for the year.
Be wise and take the following steps if you plan to remain on a group employer plan when you are Medicare eligible:
* Contact the Human Resource person and ask if the prescription coverage is creditable.
* If yes, ask for a letter stating such.
* Do this for every year you remain on the group plan and save copies.
* If the answer is no, then sign up for Medicare Part A, and enroll in a Part D Medicare plan while remaining on your group medical coverage to avoid the penalty when you enroll in Medicare Part D.
