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Medicare Part D, the prescription drug coverage, is optional. Similar to parts A and B of Medicare, it is available to beneficiaries during their initial enrollment period, when they are first turning 65, and they can enroll for up to three months after the 65th birthday month. Medicare also allows for special election periods, so people who don’t need Medicare’s Part D drug coverage when they are turning 65 may have a chance to take a drug plan later, like when they are retiring and replacing an employer or union’s coverage.
Even though Medicare Part D’s coverage is optional, there is a late enrollment penalty if a beneficiary does not enroll during their initial eligibility period and goes without creditable prescription drug coverage for more than 63 days. “Creditable” drug coverage means that the coverage is at least as good as what Medicare provides, so prescription discount programs or savings cards do not count as creditable coverage, even if they seem adequate to the patient.
The Medicare Part D late enrollment penalty is a surcharge on the plan’s premium. It is calculated by multiplying the national base premium for Part D plans, which is $31.08 in 2012, by 1% for each full month that the enrollee went uncovered by creditable prescription drug coverage, and rounding that amount to the nearest $.10. That amount is added on to the premium for the Part D plan that the enrollee has chosen, and as long as that enrollee is paying their own Part D premiums, they will have to pay that extra percentage.
For example, Mrs. Smith retired from her job in May of 2012, but she did not take any medications, so she did not enroll in a Part D plan, thinking that she did not need it. Now, in the open enrollment period, she believes she needs to enroll into a Medicare Part D plan and has selected a plan with a monthly premium of $45.
Medicare gave her a two month grace period after her retirement in May, so they do not count against her the months of June or July. A total of 17 months (5 months in 2012, 12 months in 2013) will be included in determining her late enrollment penalty. 17% x $31.08 = $5.28, which means Mrs. Smith will pay a penalty of $5.30 in addition to her premium of $45 for her 2014 Part D plan.
There is also a Medicare late enrollment penalty for Part B.