What is Creditable Drug Coverage?Posted by Medicare Made Clear
Medicare late enrollment penalties can sneak up on you if you don’t know the rules.
The late enrollment penalty for Medicare Part D prescription drug coverage is an additional 1% of the premium amount for each month you’re late. You pay the penalty for as long as you have Part D.
Now here’s the good news. You can avoid paying the Part D penalty when enrolling late if you can prove that you had creditable drug coverage within the previous 63 days.
Medicare defines “creditable” drug coverage as coverage that is at least as good as what Medicare Part D plans are required to provide. Insurance companies must deliver a notification of creditable coverage to plan members each year, usually in the fall.
Many group employer, union and retiree health plans provide creditable coverage. So if you’re transitioning from this type of plan to Medicare, you may qualify for a Special Enrollment Period (SEP). If you do, then you can enroll in a Medicare Part D plan without penalty. (You may also be able to avoid the Part B late enrollment penalty if you qualify for a SEP.)
You must sign up for a Part D plan within 63 days of losing employer or other creditable prescription drug coverage in order to avoid the premium penalty. Medicare may ask to see a creditable coverage notification from your previous plan when you enroll. The plan can provide one if you don’t have a copy in your files.
You can get prescription drug coverage in a standalone Part D plan or as part of a Medicare Advantage (Part C) plan. Both are offered by private insurance companies. You must be enrolled in both Medicare Part A and Part B to be eligible for a Part D or a Part C plan.
Don’t let Medicare enrollment catch you by surprise. You may enroll when you turn 65 or delay enrollment until later. Either way, you can call the shots better when you know the rules.
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