Quickly Learn how to avoid a Part D Penalty
One of the biggest areas of confusion surrounding the Medicare Part D penalty, is the fact that you can incur a penalty, even if you are enrolled in an employer group plan.
It is important to realize that you are not safe from a penalty simply being on a group plan, (or any health plan for that matter).
The key is knowing about “creditable coverage.”
Creditable drug coverage is prescription drug coverage that offers benefits at least as good as Medicare Part D prescription coverage. If you go more than 63 days without creditable drug coverage, you will begin to incur a penalty from that point forward, until you obtain creditable coverage again.
Here is Creditable coverage as defined by the 2011 “Medicare and You” Handbook:
Creditable Prescription Drug Coverage – Prescription drug coverage (for example, from an employer or union plan) that is expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. People who have this kind of coverage when they become eligible for Medicare can generally keep that coverage without paying a penalty, if they decide to enroll in Medicare prescription drug coverage later. - Medicare and You Handbook, 2011; Centers for Medicare & Medicaid Services
To Avoid a Medicare Part D Penalty:
When first eligible for Medicare, make sure you have existing creditable drug coverage if you do not plan to enroll in Medicare Part D. Even if you think you may never enroll in Medicare Part D, save any documentation from your plan stating your coverage is “creditable.” This will be required upon enrollment in Part D later, to avoid a penalty.
If you are on a group health plan after you are eligible for Medicare, and the plan does not offer creditable drug coverage, the plan MUST inform you of this!! However, I wouldn’t rely on them to let you know. Talk to Human Resources, or the Plan’s customer service to verify whether the drug coverage is not creditable under CMS guidelines.
If your plan’s drug coverage is creditable, the plan must send you a letter each year telling you this. It is very important to keep this information for proof that your coverage is creditable!
When your existing plan sends you a letter informing you that your drug coverage is creditable, file this letter. Keep each letter you receive. This will be your proof, to prevent paying a penalty later, if you decide to enroll in Medicare Part D. Filing away the letters will save you the trouble of obtaining this proof later.
If you are not sure if you had creditable coverage in the past, and are unable to prove it when you join a Medicare plan with Part D coverage, you may have to pay a penalty.
Recap: 5 Steps to Avoid a Part D Penalty
1. When you become eligible for Medicare, and decide not to enroll in Medicare Part D, find out if your existing coverage is creditable!
2. If you have no drug coverage, or coverage that is not creditable, you will incur a penalty after 63 days (only required to be paid later upon enrollment in Medicare Part D), so keep track of the days you are not covered.
3. Never be without creditable drug coverage for more than 63 days.
4. If your drug coverage is creditable, make sure to save documentation for all the dates you were not enrolled in Medicare Part D. If you decide to enroll later, you will need this documentation as proof to avoid paying a penalty.
5. Enroll in Medicare Part D as soon as you are eligible, if you want to be sure to avoid paying a penalty later!
Questions? Need help?
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Pamela Cook
Authorized Independent Agent
CA Insurance 0G04182
