Do you have creditable prescription drug coverage? It’s drug coverage that’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. It could be drug coverage you get from a current or former employer or union, or from TRICARE, or the Department of Veterans Affairs.
If you don’t have creditable coverage, you may want to join a Medicare drug plan now to avoid the Part D late enrollment penalty, even if you don’t use a lot of prescription drugs. People who have and keep creditable prescription drug coverage, or who get Extra Help to pay for their prescriptions don’t have to pay this penalty.
How do I know if my prescription drug coverage is “creditable”?
Your drug plan must tell you each year if your drug coverage is considered creditable coverage. They may send you this information in a letter or draw your attention to it in a newsletter or other piece of correspondence. Keep this information, because you may need it if you join a Medicare drug plan later and want to avoid the Part D late enrollment penalty. If you have creditable prescription drug coverage when you first become eligible for Medicare, generally you can keep it without paying the late enrollment penalty if you sign up for Part D later.
The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage. In general, you’ll have to pay this penalty for as long as you have a Medicare drug plan.
How much is the Part D penalty?
The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage.
Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($32.74 in 2020, $33.06 in 2021) times the number of full, uncovered months you didn’t have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.
How to avoid the Part D late enrollment penalty?
Join a Medicare drug plan when you’re first eligible.
You won’t have to pay a Part D late enrollment penalty, even if you’ve never had prescription drug coverage before.
Don’t go 63 days or more in a row without Medicare prescription drug coverage or other creditable drug coverage.
Creditable prescription drug coverage could include drug coverage from a current or former employer or union, TRICARE, Indian Health Service, the Department of Veterans Affairs, CHAMPVA, or health insurance coverage. Your prescription drug plan must tell you each year if your drug coverage is creditable coverage. They may send you this information in a letter or draw your attention to it in a newsletter or other piece of correspondence. Keep this information because you may need it if you join a Medicare drug plan later and want to avoid the Part D late enrollment penalty.
Keep records showing when you had creditable drug coverage, and tell your plan about it.
When you join a Medicare drug plan, the plan will check to see if you had creditable drug coverage for 63 days or more in a row. If the plan believes you didn’t, it will send you a letter with a form asking about any drug coverage you had. To avoid a Part D penalty, complete the form and return it to your drug plan by the deadline in the letter. If you don’t tell the plan about your creditable drug coverage, you may have to pay a Medicare Part D late enrollment penalty.
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Learn how the Part D late enrollment penalty is calculated?
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