Your Medicare Advisor

Deciphering the Medicare Part D Late Enrollment Penalty

medicare-part-dIf you are Medicare-eligible, you might wonder whether you should enroll in a Part D prescription drug plan. It may seem like a pointless expense, especially if you are not taking any medications or the ones you do take are inexpensive. However, electing not to pick up drug coverage when you were first eligible can become a costly decision in the long run as you may be assessed a penalty.

Now, the penalty starts accruing once your Initial Election Period ends (the 7-month window surrounding your 65th birthday that ends three months after your birthday month), and you have a lapse in credible drug coverage of 63 days or more. It is based on the number of months you went without drug coverage- for each month you went without drug coverage; you will pay 1% of the average beneficiary premium. For 2021, the average beneficiary premium is $33.06.

So, let’s say you waited 33 months to sign up for drug coverage. Your 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 $33.06 x .33 = $10.90. That penalty gets added to your premium indefinitely once you do enroll in a drug plan.

Again, if you have credible drug coverage through another source, for example an employer or union, TRICARE, Department of Veteran Affairs, or you receive Extra Help, then you will not be penalized. Credible coverage is defined as coverage that is expected to pay at least as much as Medicare’s standard prescription drug coverage. You should receive correspondence each year notifying you if your coverage is credible.

Ultimately, enrollment in a drug plan is considered optional, but there is a penalty associated with delaying your enrollment unless you have credible coverage in place. Without drug coverage you are exposed to many unexpected expenses, like if you become ill and need to pay for medications. You may want to weigh out your options before you decide to forgo the coverage.

Call 1-800-334-9330 and one of AMAC’s trusted, licensed Advisors will be happy to assist you with your needs.

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