Wednesday, May 22, 2024

What Is The Penalty For Dropping Medicare Part D

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Can I Delay Enrollment In Part D Coverage

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If you didnt enroll in prescription drug coverage either through a PDP or a Medicare Advantage plan during your initial open enrollment window and then you enroll during an open enrollment period in a future year, theres a late enrollment penalty that will be added to your premium .

The Part D late enrollment penalty would also apply if you drop your prescription coverage for more than 63 days and then re-enroll during the open enrollment period. Its important to maintain continuous drug coverage from the time youre first eligible, both to protect against significant prescription costs, and also to avoid higher premiums when you ultimately re-enroll.

What Happens If Medicare’s Contractor Decides The Penalty Is Wrong

If Medicares contractor decides that all or part of your late enrollment penalty is wrong, the Medicare contractor will send you and your drug plan a letter explaining its decision. Your Medicare drug plan will remove or reduce your late enrollment penalty. The plan will send you a letter that shows the correct premium amount and explains whether you’ll get a refund.

Is There A Cap On The Medicare Part B Penalty

As of now, there is no cap when calculating the Medicare Part B late enrollment penalty. However, legislation has been introduced to cap the Medicare Part B penalty at 15% of the current premium, regardless of how many 12-month periods the beneficiary goes without coverage.

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As of now, all legislation to reduce the penalty is under review and has not been passed. However, it would save thousands of beneficiaries from the high cost of the Medicare Part B penalty.

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Penalties If You Dont Enroll In A Part D Plan

If you do not enroll in a plan and do not have creditable coverage for your drugs, you will incur a penalty of 1% of the average national premium for every month you were eligible and did not enroll. This amount is added on to your drug plan premium. Note: Medicare waives this penalty for anyone who qualifies for Extra Help, also known as the Low-Income Subsidy program.

In addition, if you do not enroll into a Part D plan when you are first eligible, you will generally only be able to enroll during certain enrollment periods.

When Can You Enroll In Medicare Part D

Do you owe a Medicare Part B Penalty?

To enroll into a Medicare Part D Prescription Drug Plan, you need to have either Medicare Part A or Part B, and you have to live in the service area of the plan you choose. If youâre eligible for Medicare because of age, your seven-month Initial Enrollment Period for Part D usually takes place at the same time as your Initial Enrollment Period for Part B, starting three months before your 65th birthday, including your birthday month, and ending three months later. If you qualify for Medicare through disability, youâll get a subsequent Initial Enrollment Period for Part D when you turn 65 years of age.

The Medicare Part D late-enrollment penalty may apply if you enroll any time after your Initial Enrollment Period for Part D and go without creditable prescription drug coverage for more than 63 days in a row. If you donât enroll in Medicare Part D when youâre first eligible, your next opportunity will be during the Annual Election Period that occurs from October 15 to December 7 of every year. During this time, you can enroll into a stand-alone Medicare Prescription Drug Plan if you have Original Medicare or get prescription drug coverage through a Medicare Advantage Prescription Drug plan. You can also use this period to switch plans or disenroll from your plan.

During the Medicare Advantage Open Enrollment Period , you may be able to make certain coverage changes. The OEP runs from January 1-March 31 each year.

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Medicare Part D Enrollment: Common Mistakes To Avoid

One major pitfall youll want to avoid with your Medicare prescription drug coverage is the late enrollment penalty. This penalty is an amount that is permanently added to your Medicare drug plans premium. You may have to pay this penalty if there is a period of 63 days or more after your Medicare IEP where you dont have creditable prescription drug coverage. Creditable drug coverage refers to a drug plan that pays at least as much as Medicare Part D on average.7

There are a few common mistakes that could land you with a :8

  • Not enrolling in Medicare as soon as you can: Try to enroll in a Medicare or Medicare Advantage drug plan as soon as you qualify for Medicare. That way, you can avoid a late enrollment penalty later, even if you dont need prescription drugs right now.
  • Not getting Medicare drug coverage if you lose other insurance: Once you go 63 days in a row without a Medicare drug plan or creditable drug coverage, you run the risk of getting a late enrollment penalty.
  • Not keeping track of your records: If you get your prescription drugs with the help of creditable drug coverage, keep your plans records handy. If you dont tell your Medicare plan about this coverage, you may end up having to pay the late enrollment penalty.

When you enroll, its important to compare plans before you make a decision. Medicare Part D plans may differ based on their pharmacy networks, their premiums or the drugs they cover. Make sure you find a plan that works best for you.

What If I Don’t Agree With The Late Enrollment Penalty

You may be able to ask for a “reconsideration.” Your drug plan will send information about how to request a reconsideration.

Complete the form, and return it to the address or fax number listed on the form. You must do this within 60 days from the date on the letter telling you that you owe a late enrollment penalty. Also send any proof that supports your case, like a copy of your notice of creditable prescription drug coverage from an employer or union plan.

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Medicare Part D Late Enrollment Penalty Calculator

The Medicare Part D penalty is based on the number of months you were eligible for Original Medicare without having creditable prescription drug coverage. For each month you go without Medicare Part D or other creditable coverage, you will pay an additional premium of 1% of the current national base beneficiary premium meaning the average cost of Medicare Part D.

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For 2022, the average beneficiary premium is $33.

Additionally, the Medicare Part D penalty is not a one-time penalty. You will pay monthly for as long as you have Medicare prescription coverage. The Medicare Part D penalty is rounded to the nearest 10¢ and added to the premium you pay for your Medicare Part D plan.

Since the Medicare Part D penalty is always based on the current years national base premium, it is subject to change or increase each year. The Medicare Part D penalty calculation can be challenging to calculate. So we provide an example to show how it works.

Suppose your Initial Enrollment Period ended, and you waited 24 months to sign up for Medicare Part D. Your Medicare Part D penalty would be 24 percent of the national base premium one percent for each of the 24 months you waited.

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Thus, the calculation is $33 x .24 = $7.90 .

What Will I Pay For Part D Coverage

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CMS has announced that the average Part D plan will cost $33/month in 2022. But the plans are issued by private insurers, and theres significant variation in terms of the benefits, the formularies and the pricing. Among the Part D plans that are available in 2022, premiums range from under $6/month to more than $207/month.

High-income enrollees pay extra for their Part D coverage. For 2022, the additional premiums range from $12.40/month to $77.90/month.

The premium adjustment for high-income enrollees is based on income tax returns from two years prior, since those are the most recent returns on file at the start of the plan year . Theres an appeals process you can use to contest the income-related premium adjustment if youve had a life-change event that has subsequently reduced your income.

In addition to the premiums, youll pay a copay or coinsurance for drugs. The donut hole in Part D plans has closed, thanks to the Affordable Care Act. It was fully closed as of 2020: Enrollees with standard Part D coverage now pay 25% of the cost of generic and brand name drugs while in the donut hole, which is the same percentage they pay before entering the donut hole.

Once you select a PDP, there are four ways to pay the premium:

  • deducted from your personal account
  • charged to credit or debit card
  • billed monthly or

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How To Enroll In A Medicare Part D Prescription Drug Plan

Once you have Medicare Parts A and B , youre eligible for a Part D prescription drug plan. These plans can vary based on price, coverage, and the formularythe list of covered prescription drugs. Because each Medicare Part D plan may be different, its important to compare plans before you enroll.

There are 2 different ways you can get prescription drug coverage. You could enroll in a . There are also a few different ways you can enroll:1

  • Use

How Can I Avoid Late

The answer to this question is relatively simple but significant: dont miss the enrollment periods and have creditable drug coverage set in place if you disenroll.

If you leave your Part D plan with intentions of joining a new plan but did not have creditable drug coverage when you disenrolled, then when you re-enroll for a Part D plan, you will be charged a permanent late-enrollment penalty for each month you went without drug coverage. The penalty will be added to the cost of your premium.

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D Late Enrollment Penalty

The late enrollment penalty is an amount that’s permanently added to your Medicare drug coverage premium. You may owe a late enrollment penalty if at any time after your Initial Enrollment Period is over, there’s a period of 63 or more days in a row when you don’t have Medicare drug coverage or other

. Youll generally have to pay the penalty for as long as you have Medicare drug coverage.

, you don’t pay the late enrollment penalty.

Medicare Prescription Drug Plan Disenrollment

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The time to disenroll from a Medicare Prescription Drug Plan is during the yearly fall Medicare Open Enrollment Period for Medicare Advantage and prescription drug plans, which as mentioned above takes place from .

There are four ways in which you may disenroll from Medicare Part D during this time:

  • Mail a signed written letter to your plans mailing address notifying them of your desire to disenroll.
  • Submit a disenrollment request through the plans website .

You can typically find the contact information for your Medicare Part D plan on your membership card.

Are you looking to disenroll from your current prescription drug coverage and switch to a new Medicare Part D plan?

You can compare Part D plans available where you live and enroll in a Medicare prescription drug plan online in as little as 10 minutes when you visit

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Common Scenarios To Avoid Where The Medicare Part B Penalty May Apply

Once you are eligible for Original Medicare, it is important to know how to avoid additional costs. Penalties are an additional cost that no one plans for, and everyone hopes to avoid, especially when it comes to Medicare.

Here are some examples of scenarios to avoid if you do not want to pay the Medicare Part B Penalty:

  • You retire at 65 and continue retiree coverage until 70, then decide to enroll in Medicare Part B.
  • You lose employer coverage and wait longer than eight months to enroll in Medicare Part B
  • You do not have insurance coverage and wait until you are 67 to enroll in Original Medicare
  • You delay Medicare Part B coverage because of VA benefits past age 65

These scenarios are just a few examples of how you can be stuck paying the Medicare Part B penalty for life. If you avoid these scenarios or similar ones, you can avoid paying the Medicare Part B penalty altogether.

How Can I Avoid Late Enrollment Penalties

  • Sign up during your IEP.
  • Contact your current health insurance plan before you become eligible for Medicare if you are unsure about whether or not you qualify for a SEP.
  • Enroll before your SEP ends.
  • Even if you do not take prescription drugs when you become eligible for Medicare, consider enrolling in a low-cost drug plan to avoid having to pay late penalty fees later.
  • Keep good records of your current health insurance notices of creditable coverage and any conversations you have with agents who offer you advice.

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Have More Questions About Medicare Enrollment

A licensed insurance agent can help you review your Medicare enrollment options and find the right coverage for your needs. Call today to speak with an agent.

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About the author

Christian Worstell is a senior Medicare and health insurance writer with He is also a licensed health insurance agent. Christian is well-known in the insurance industry for the thousands of educational articles hes written, helping Americans better understand their health insurance and Medicare coverage.

Christians work as a Medicare expert has appeared in several top-tier and trade news outlets including Forbes, MarketWatch, WebMD and Yahoo! Finance.

Christian has written hundreds of articles for that teach Medicare beneficiaries the best practices for navigating Medicare. His articles are read by thousands of older Americans each month. By better understanding their health care coverage, readers may hopefully learn how to limit their out-of-pocket Medicare spending and access quality medical care.

Christians passion for his role stems from his desire to make a difference in the senior community. He strongly believes that the more beneficiaries know about their Medicare coverage, the better their overall health and wellness is as a result.

Medicare has neither reviewed nor endorsed this information.

How To Decide If You Need Part D

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If you need prescription drug coverage, selecting a Part D plan when you become eligible is often a good ideaespecially if you dont currently have what Medicare considers creditable prescription drug coverage.

Prescription drug coverage that pays at least as much as Medicares standard prescription drug coverage is usually considered creditable, and could be an existing plan you have through an employer or union.

If you dont elect Part D coverage during your initial enrollment periodand youdont have creditable prescription drug coverage, youll probably pay a late enrollment penalty if you decide you want it later. The late enrollment penalty permanently increases your Part D premium.

However, if you do have creditable coverage and keep it, you can generally enroll in Part D later without paying a penalty.

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Eligibility For Part D

Anyone with Medicare is eligible to enroll in a Part D plan. To enroll in a PDP, the individual must have Part A OR Part B. To enroll in an MA-PD, the individual must have Part A AND Part B.

Enrollees must live in their plans service area. In the case of homeless persons, the following may be used as a permanent residence: a Post Office box, the address of a shelter or clinic, or the address where the person receives mail such as Social Security checks.

PDPs are usually national plans, but MA-PDs have delineated regions, sometimes by state, sometimes by counties within states ). For this reason, MA-PDs may not be appropriate for those who travel a great deal or who maintain summer and winter residences in different areas of the country. NOTE: Some MA-PDs offer passport plans that allow members to obtain benefits outside their normal service areas.

Individuals who reside outside the United States* are not eligible to enroll, but may do so upon their return to the country. Incarcerated individuals may not enroll in Part D, but they may enroll upon release from prison. Prior to 2021, people with end-stage-renal-disease could not enroll in an MA-PD. Starting in 2021, people with ESRD can enroll in Medicare Advantage plans during the annual Open Enrollment Period.

There are no other eligibility restrictions or requirements for Part D.

Medicare Part D Penalty Appeal

If you are responsible for the Medicare Part D penalty, you can appeal the decision. All you must do is complete a reconsideration request form. This form is available on

Additionally, if you qualify for Extra Help, you may be eligible for Medicare Part D penalty assistance. Some lower-income beneficiaries have the penalty waived altogether. You can contact Social Security to apply for Medicare Extra Help.

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Understanding The Donut Hole Coverage Gap

For most Medicare prescription plans, there is a temporary limit on what the plan covers. This is called the coverage gap, or the donut hole. In 2022, this coverage gap will be triggered once you and your plan spend a combined $4,430 on covered medications. Once youre in the coverage gap, you will pay a maximum of 25% of the cost for brand-name drugs in your plan. Although you pay only a fraction of the cost of your prescriptions, almost the full price of the drugs count toward your out-of-pocket costs.12

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