Do not dismiss the idea of enrolling into a Medicare Part D plan right away because you currently have adequate coverage or do not take any prescription drugs. Weigh the options and consequences before not enrolling – or it could cost you more in the long run.
Do I need Medicare Part D if I don’t use and prescription drugs right now?
If you don’t use many, if any, prescription drugs at the moment, you might be wondering why it would be worth signing up for a Medicare Part D plan. You may see it as paying a premium but reaping no benefits. However, this drug coverage is insurance – it is more than just a benefit. It protects you against high drug costs that you may encounter in the future. If these are your circumstances, consider a Part D plan with a low premium, giving you coverage at a low cost.
Can I wait and sign up later?
Technically, yes, but be careful. If you put off enrollment in a Part D plan when you do not have other drug coverage, like retiree benefits, you need to be aware of the consequences.
- You will only be able to sign up during Medicare Open Enrollment (10/15 – 12/7) regardless of when you feel you need drug coverage
- You will face permanent penalties that will be added to your premium if you go more than 63 days without any drug coverage that is considered as good as Medicare Part D
What is the late enrollment penalty?
The penalty results in at least 1% of the national average premium are added to your monthly premium for each month that you delay and do not have credible drug coverage. The penalty increases and decreases with the national average – so you cannot count on it being the same every year. You will pay this penalty for the entire time that you are enrolled in Medicare drug coverage. For example, if you delay for two years, your premium will be 24% higher than others pay – or what you would have paid if you signed up on time.
How to avoid the late penalty
This all depends on when the right time for you to sign up for Medicare Part D is, and it all depends on your circumstances, such as:
- When you turn 65 – If you turn 65, you have no drug coverage as good as Medicare. You need to join a Medicare Part D plan during your seven-month initial enrollment period, when you will also sign up for Original Medicare Parts A and B. This starts three months before you turn 65 and lasts until three months after you’ve turned 65. Coverage will begin on the first day of the month after you enrolled in a plan.
- If you become eligible for Medicare through disability, you will receive a similar 7-month enrollment period to sign up for Medicare in these circumstances. This runs three months before the 25th month you received Social Security disability payments and ends three months after
- If you lose drug coverage – If you did have coverage through a former employer, union, or spouse, and you lose it, you must enroll in a Medicare Part D plan within 63 days of losing this coverage to avoid the penalty
- When you lose COBRA coverage – you will avoid the late penalty in these circumstances if you enroll within 63 days of your COBRA coverage ending. This is assuming that the COBRA coverage is considered as good as Medicare Part D
- When you return to the US after living abroad – While living abroad, you cannot receive Medicare Part D coverage, but you can enroll in Part D when you return to live in the country. If you turned 65 while abroad, you receive seven months from three months before returning to three months after. If you were 65 before you left, you would receive a 63-day Special Enrollment Period (SEP) once you return.
- If you are released from prison – you cannot receive Medicare Part D coverage in any correctional facility. However, you will be given a 7-month enrollment period when you are released from prison if you turned 65 while inside the correctional facility. If you were 65 before going to prison, you would have 63 days after your release date to enroll in a plan
- If you receive Extra Help to pay for your Medicare Part D plan – you will not face a late penalty
What will happen if I have employer-sponsored coverage or retiree benefits when I become Medicare-eligible?
Your current or former employer or union will inform you if your drug coverage changes when you turn 65 or become eligible for Medicare coverage. This will also apply if your spouse is covered under your employer-sponsored plan and they become Medicare-eligible. Some of the options include:
- Continue the current coverage after checking to see if it is as good as Medicare
- Offer coverage through a specified Medicare plan that you must enroll in to keep your employer’s coverage
- Offer coverage that adds to Medicare by paying some or all your out-of-pocket expenses with Medicare Part D
- Drop coverage – could help towards the cost of your Medicare Part D premium or not help at tall
How will I know if my current coverage is as good as Medicare’s?
Whichever party is responsible for your prescription drug coverage should tell you before you turn 65 whether or not your coverage is considered as good as Medicare Part D – also known as being “creditable.” Call and ask for this information in writing if you do not receive it.
If your coverage is indeed creditable, you do not need to do anything more. If you qualify for financial help with your Part D premiums, compare this to what you have now before making any changes.
You can still keep coverage that is not creditable but keep in mind that you will face the late penalty if you go 63 days without creditable coverage.
What are the risks of enrolling in Medicare Part D if I already have prescription drug coverage?
One of the main risks is that you may lose medical coverage if you drop your employer-sponsored plan. Most employer and union drug coverage is also offered as part of a package, so you may lose medical benefits and not get them back. This could also affect dependents on your policies, if you have any. Contact your current benefits administrator to answer any questions and make the consequences clear before making any decisions.
What if I lose my creditable drug coverage or decide to drop it?
If you lose creditable coverage through no fault of your own – you receive a Special Enrollment Period (SEP) to sign up for Medicare Part D with no late penalty. However, if you choose to drop creditable coverage, you will have to sign up for coverage during the open enrollment period from 10/15 to 12/7 and begin coverage on 1/1. If this results in you going more than 63 days without creditable coverage – you will face the late penalty.
Do federal retirees need Medicare Part D coverage?
No, suppose you are enrolled in the Federal Employees Health Benefits Program (FEHBP) as an employee or retiree. In that case, you have creditable drug coverage that is better than Medicare Part D. However, if you see benefits in having both types of coverage, such as you qualify for Part D extra help – you can enroll without risking your FEHBP benefits.
Do I need Medicare Part D if I am a military retiree enrolled in TriCare-for-Life (TFL)?
Drug coverage from TFL is much more generous than Medicare Part D, so no. But once again, if you qualify for extra help, you can enroll in both. If you lose TFL coverage for some reason, you will have 63 days from the end of that coverage to enroll in Medicare Part D and avoid the penalty.
I have VA coverage – should I sign up for Medicare Part D as well?
It would be an advantage to also sign up for Medicare Part D in this situation. Veterans who are in the VA pharmacy program can also hold a Medicare Part D policy at the same time without losing VA coverage. The same applies to those enrolled in CHAMPVA. You can choose which plan to use on a prescription-by-prescription basis, but you cannot use both on the same prescription. If you lose VA coverage, the 63-day rule once again applies to avoid the late penalty.
I receive my prescriptions from the Native American Health Services – do I need Part D?
Drug coverage through these services is creditable, so you do not need a Medicare Part D plan. Even if you get free or low-cost drugs, you do not need to enroll in Part D. If you qualify for Extra Help, enrolling can help stretch the federal dollars supporting your local clinic. Contact your current benefits administrator or health clinic to weigh your options before turning 65.
What if I am enrolled in a Medicare Supplement (Medigap)?
Medicare Supplements do not pay for drugs and will not be affected by your Medicare Part D plan. If you have been grandfathered into a Plan H, I, or J (which are no longer available), these are your options
- You can keep your policy, but you cannot also enroll in a Medicare Part D plan. Most of these policies are not creditable, so you will face a late penalty if you decide to join Part D in the future
- You can keep the policy but drop the drug coverage (or switch Medigap plans) to enroll in Medicare Part D
Medicaid currently covers my prescription drugs – what happens when I turn 65?
When you become Medicare-eligible, you must get your drugs from a Medicare Part D plan instead of Medicaid. However, you will automatically qualify for Medicare Part D’s Extra Help program. For more information on this, contact your state health insurance assistance program (SHIP).
Can I still get my drugs from a state pharmacy assistance program (SPAP)?
If your SPAP is considered qualified and meets Medicare’s requirements, you can stay in the program. SPAP will still most likely require you to enroll in Medicare Part D and apply for Extra Help as well. Call your state’s SPAP for more information.
What if I purchase individual coverage for myself?
You can keep this coverage alongside Medicare Part D if you would like. If the program is not creditable – you will need to enroll in a Medicare Part D plan to avoid the late penalty. Your insurer should let you know if your plan is creditable or not.
If you join Medicare Part D, you can use the individual insurance to supplement your Medicare coverage if the policy allows. However, payments made by the insurer in the coverage gap will not count towards your out-of-pocket limit.