How to Avoid Paying More for Prescription Drug CoveragePosted by Medicare Made Clear
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.
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 signing up for Part D after age 65. 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.
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.
If you have drug coverage through a group plan, that plan is required to tell you if your coverage is considered creditable. 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 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 current average Part D premium, the amount of time you are late and a fixed percentage. The penalty is 1 percent of the average Part D premium for each month past your eligibility date. You can see the math in this Medicare.gov example.
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 Annual Enrollment Period from October 15 to December 7 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 companies.
1. You can enroll in a Medicare Advantage plan (Part C) that combines Parts A and B along with a prescription drug plan.
2. You can get a standalone Part D plan to add prescription coverage to Original Medicare.
Want a quick review? Watch our video to understand how Part D works and your options.
Tags: Medicare Coverage Questions, Medicare Drug Plans, Medicare Part C, Medicare Part D