As people get closer to Medicare age – usually age 65 – most are either unaware or do not fully understand the lifetime penalty for failing to purchase the Part D Medicare Prescription Drug coverage. Sadly, Medicare doesn’t do a good job of reminding people of this requirement.
In a nutshell, once you attain the age of 65 and after, if you do not have a Medicare Part D Prescription Drug Plan (or other creditable coverage) for a period of over 63 days, you will incur a LIFETIME monthly penalty of 1% for each (and every) month you go without such coverage. This percentage is multiplied by the Medicare base beneficiary premium.
If you are 65 or over and are covered on a group medical plan, that plan provider is required to notify you about whether or not the prescription coverage on that plan is creditable.
VA Healthcare from Veterans Administration does qualify as Medicare-creditable prescription drug coverage. While there isn’t a premium charge for VA Healthcare, the VA does require that the veteran enroll to obtain coverage. As a general rule, there is means testing for eligibility for VA Healthcare, but veterans who served in Vietnam may be eligible regardless of income. You can find more information by clicking here.
Medicare.gov provided an example (see below) of how the failure to enroll penalty is figured and is recalculated every year. Click here to see it online or read the example below.
Example (provided on Medicare.gov)
Mrs. Martinez is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2015. She doesn't have prescription drug coverage from any other source. She didn't join by May 31, 2015, and instead joined during the Open Enrollment Period that ended December 7, 2017. Her drug coverage was effective January 1, 2018.
Since Mrs. Martinez was without creditable prescription drug coverage from June 2015–December 2017, her penalty in 2018 was 31% (1% for each of the 31 months) of $35.63 (the national base beneficiary premium for 2018) or $10.86. Since the monthly penalty is always rounded to the nearest $0.10, she paid $10.90 each month in addition to her plan's monthly premium.
Here's the math:
.31 (31% penalty) × $35.02 (2018 base beneficiary premium) = $10.86
$10.86 rounded to the nearest $0.10 = $10.90
$10.90 = Mrs. Martinez's monthly late enrollment penalty for 2018
In 2019, Medicare recalculated Mrs. Martinez's penalty using the 2019 base beneficiary premium ($33.19). So, Mrs. Martinez's new monthly penalty in 2019 is 31% of $33.19 or $10.29 each month. Since the monthly penalty is always rounded to the nearest $0.10, she pays $10.30 each month in addition to her plan's monthly premium.
Here's the math:
.31 (31% penalty) × $33.19 (2019 base beneficiary premium) = $10.29
$10.29 rounded to the nearest $0.10 = $10.30
$10.30 = Mrs. Martinez's monthly late enrollment penalty for 2019
Suffice to say that enrolling in a timely manner will save you money.
Make sure you understand the potential penalty of not enrolling in Medicare Part D in time. If you need assistance or have questions, the professionals at Hummel Insurance Services can help. The agency has been a trusted source of quality insurance products for more than 70 years in the Oakland, IA community and can provide you with a great deal of valuable information. When you’re ready to shop for a policy, they will be happy to go over all your options with you. Call (712) 482-6424 to request insurance quotes, or visit them online to learn more about the different types of life insurance available.