Everything You Need to Know about Part D Prescription Drug Plan Penalties
Your eligibility for Medicare Part B is relatively straightforward: you need to be 65 years old, or to be on disability for at least 24 consecutive months. You have a seven-month window to enroll from the month you turn 65, including the three months before and three months after.
Part D enrollment for prescription drug coverage falls within the same window. If, however, you do not have credible drug coverage through an employer or the VA, and you do not enroll in Part D during that window, you may face a late enrollment fine. The fine serves as an incentive to get as many people covered as possible, but also as a way of covering the cost of uninsured individuals. This penalty can be avoided by enrolling on time or by maintaining other credible prescription coverage.
How the Penalty Is Applied
If you enroll late:
- You are subject to a penalty that consists of 1% of the national base beneficiary premium ($34.10 in 2016) for each month after the enrollment period in which you do not have prescription coverage.
- The penalty is rounded to the nearest $.10. So, for example, if you turned 65 on March 10, 2014, your enrollment period would end on June 30, 2014.
- If you do not enroll until November 13, 2016, your coverage begins on December 1, 2016.
- In these circumstances, you must pay a penalty on 29 months (July 2014 through November 2016). The penalty would thus be 29% of $34.10, or $9.90.
- With Medicare Part D prescription drug plan enrollment, the program will tell you whether you have to pay a penalty, and how much the penalty will be. This is then added to your monthly premium. Thus, in the example above, your payments would consist of your regular monthly premium plus $9.90 per month.
Other Prescription Coverage
For the penalty on a Medicare Part D prescription drug plan to apply, you have to have gone at least 63 days with no prescription drug coverage. Thus, if you have a private plan or a plan through your employer that includes prescription drug coverage, you are not subject to a late enrollment penalty through Medicare.
In the above example, what if you had full medical and prescription coverage through an employer plan? If you were covered up through May 31, 2016, your penalty would only include the months of June 2016 through December 2016. For those five months in which you were not covered, your penalty would thus be 6% of $34.10, or $2.05.
Enroll On Time
Of course, you can avoid the late enrollment penalty entirely by enrolling on time. If you do this within three months before or after you turn 65, you need not worry about a late payment fine for a Medicare Part D prescription drug plan. Similarly, if you enroll within two months of the time you lose your previous prescription drug plan, you will not be subject to a penalty. If you miss your Initial Open Enrollment window when turning 65 or enrolling in Medicare Part B, you'll have to wait until the next Annual Enrollment Period, the following year.
Ultimately, you have control over whether you owe a late enrollment penalty for your Part D coverage. Enroll before the penalty would begin, and you can save money on your premium costs.
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