Medicare May Charge Lifelong Part D Penalties

Save Money by Signing Up for Part D On Time

Medicare Part D late penalties
You may pay Part D penalties as long as you have Medicare. GP Kidd/Culture/Getty Images

Medicare will hit you with late penalties if you are not careful. Part D penalties could last you as long as you are on Medicare. Take steps to avoid getting caught paying more.

When Do You Have to Sign Up for Part D?

You become eligible for Medicare when you turn 65 years old or when you have a qualifying disability. Each of these eligibility criteria has its own Initial Enrollment Period (IEP). You can enroll in a Part D plan during an IEP but Part D eligibility goes a step beyond that.

Many people still have access to other health insurance through their employer, spouse, retiree benefits or elsewhere when they become eligible for Medicare. That coverage may include prescription drug coverage. It is important to know if that coverage is creditable. Creditable coverage means that your prescription coverage is at least as good as a Part D plan.

As long as you have creditable drug coverage, you do not have to enroll in Part D and you will not be charged with late penalties when or if you do decide to sign up. Your current health plan will notify you if your coverage is creditable or not. Pay close attention to statements from your insurance company.

If your coverage is not creditable or if you lose that coverage for any reason, you have 63 days to sign up for a Part D plan. After that time, you will be charged late penalties.

When Can You Sign Up for Part D?

You can only sign up for Part D during certain times of the year.

You can enroll during your IEP. In the case that you missed your IEP for Medicare, you can sign up for Part A and/or B during the General Enrollment Period. When you use the General Enrollment Period from January 1 to March 31, you are given a Special Enrollment Period to sign up for Part D. This happens from April 1 to June 30.

 You also have the option of signing up for Part D during Open Enrollment which happens from October 15 to December 7 every year.

Calculating Your Part D Penalty

Depending on the Part D plan you choose, your monthly premiums may vary. It would not be fair to penalize a beneficiary for picking a plan that happens to be more expensive based on their medical needs. For this reason, the federal government sets the national base beneficiary premium (NBBP) every year to set a standard. They use this number to calculate your late penalties. Because the NBPP changes every year, your late penalties will also change every year.

You will be charged one percent of the NBBP for every full month you were eligible for Part D but did not enroll. The late penalty will be rounded off to the nearest $0.10 and will be paid to the government, not to the company that offers your Part D plan.

0.01 x NBBP x # months without creditable coverage

In 2016, the NBBP is set at $34.10. If you missed eligibility by ten months, you would pay $3.40 (0.01 x $34.10 x 10 months) extra every month for a total of $40.80 more over the course of the year.

How to Get Rid of Your Part D Penalty 

Part D late penalties generally last as long as you have Medicare. The one exception is when you become eligible for Medicare before you turn 65 years old. When you celebrate your 65th birthday, you are granted a new IEP based on your age. Your former late penalties will be discontinued. Be sure not to miss this second IEP, however, or you will face lifelong penalties.

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