Robin Cruson
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If you've got a chronic condition that requires a lot of medication, chances are you've got your prescription drug plan figured out.  If you're in tip-top shape and don't take a single pill, what's the point?  When it comes to prescription drug coverage and Medicare, if you don't sign up when you're first eligible, you could pay more down the road through penalties.

So you might be asking yourself "Why does the federal government require you to sign up and pay a premium for something you may not use right now?"  Susan Morisato, President of Insurance Solutions for UnitedHealthcare's Medicare and Retirement Services, says it's the same reason you have insurance on property.

"Once your house is on fire, you can't buy homeowners insurance," says Morisato.  "The whole concept of insurance is that it's a shared risk."

Prescription drug coverage is also known as Part D in Medicare.  The Washington Post reports there is a lot of confusion around the penalty for not signing up in time for Part D.  The confusion centers on people who have coverage from a current or former employer, union or other group plan.  The bottom line is if you have drug coverage that meets Medicare's minimum standards you won't pay a penalty for not signing up for Part D when you become eligible.


Creditable Coverage

What are those minimum standards for prescription coverage?  Coverage needs to be "creditable."  This means that the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage, or more.  If you have drug coverage through a group plan, that plan is required to tell you if your coverage is considered "creditable," or not.  Medicare requires your plan to send you this information at least once a year.  It may come in a standalone notice or in a letter or newsletter.  Keep this information; you might need to provide it when you sign up for a Medicare drug plan later.


Calculating the Penalty

If you don't have "creditable" prescription drug coverage, you may pay more to get a Part D plan down the road.  Time runs out 63 days after you don't have "creditable" prescription drug coverage.  After that you may have to pay a penalty.

The way the penalty is calculated is based on a few factors.  The formula includes the base premium, amount of time you are late and a fixed percentage -- one percent per month of late enrollment.  You can see the math in this example:

The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage.

Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($33.13 in 2015) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.

The national base beneficiary premium may increase each year, so your penalty amount may also increase each year.



In 2015, Medicare recalculated Mrs. Martinez's penalty using the 2015 base beneficiary premium ($33.13).  So Mrs. Martinez's new monthly penalty in 2015 is 31% of $33.13 or $10.27 each month.  Since the monthly penalty is always rounded to the nearest $0.10, she'll pay $10.30 each month in addition to her plan's monthly premium.


This is important because your healthcare needs may change as you age and your doctor may prescribe different or additional medications.  Morisato recommends using the Open Enrollment Period from October 15th to December 7th each year to reevaluate your plan and make changes as your needs change.  People who qualify for Extra Help, a Social Security program for people with limited resources and income, will not be penalized.


Signing up for Part D

You can avoid penalties by ensuring you have prescription drug coverage.  There are two ways to get a Medicare Part D plan.  Both are through private insurance carriers.

  1.  You can enroll in a Medicare Advantage plan (Part C) that combines Parts A and B along with a Part D prescription drug plan.
  2.  You can get a standalone Part D plan to add prescription coverage to Original Medicare Parts A and B.

Want a quick review?  Watch this video to understand how Part D works and your options.


For more information please contact Cruson Insurance Agency at (972) 896-3851, Monday - Friday 9 AM to 9 PM or Saturday 9 AM to 6 PM.  You can also contact Medicare 24 hours a day, 7 days a week at 1-800-MEDICARE (1-800-633-4227), TTY 1-877-486-2048.


The Cruson Insurance Agency is your single source for all of your insurance needs. Whether you're looking for health coverage, Medicare plans, life insurance, final expense plans, temporary health coverage for new employees or in between jobs, vision, dental, hearing and even pet insurance; we can help you find the coverage that best suits your needs. - Contact Robin at  
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