Hello Toni: I turned 65 in August the year before last, continued to work full-time with an HSA that has a $3,000 deductible for medical claims paid by the insurance plan, and used a prescription discount card to cover medications. My employer’s human resources manager advised me to enroll in Medicare Part A when I turned 65. Because I received incorrect information, I could not fund my HSA from that time.
I decided to delay enrolling in Part B until I retired and enrolled in a Medicare Supplement Plan G and a Part D prescription drug plan with a January 1 start date.
I just received a notice from CMS (Medicare) saying they do not have record of me having prescription drug coverage that “met Medicare’s minimum standards” from the month I turned 65 through December, and I may receive a Part D late enrollment penalty. What does this mean? — Claude
Claude: I do not have good news for you. You have a Medicare Part D prescription drug penalty problem.
The Medicare & You handbook states: Creditable prescription drug coverage could include drug coverage from a current or former employer or union, TRICARE, Indian Health Service, the Department of Veterans Affairs, or individual health insurance coverage. If you go 63 days or more in a row without Medicare drug coverage or other creditable prescription drug coverage, you may have to pay a penalty if you sign up for Medicare drug coverage later.
So Americans with “creditable” coverage can apply for a Medicare Part D plan at a later date without paying a penalty. (Chapter 5 of the Medicare Survival Guide Advanced edition explains Medicare Part D and how to avoid Part D penalties).
Unfortunately, prescription discount programs — such as GoodRx or store prescription memberships — are not considered “creditable” coverage.
There is a further complication to getting Part D coverage: Many Americans who retire after age 65 with employer benefits will know to file the “Request for Employment Information CMS L-564” form with Social Security to avoid the “famous” Medicare Part B penalty. But they may be surprised to learn that the form does not tell Medicare if you had “creditable” prescription drug coverage!
Medicare calculates the Part D penalty by multiplying 1% of the “national base beneficiary premium” ($32.74 in 2023) by the number of full, uncovered months that you didn’t have either Part D or creditable coverage, and rounding to the nearest 10 cents. That amount is added to your monthly Part D premium.
Your late enrollment period (LEP) does not begin from the day you lose or leave your company health plan, but from the month that your Medicare Part A started. So your 17 months without creditable coverage will cost you an extra $5.60 per month for 2023, Claude. (The national base amount can change each year, so your penalty may also change.)
The LEP penalty can be applied if:
--You waited more than 63 days without creditable prescription drug coverage when leaving company benefits, and you are older than 65 years old and 90 days.
--Your prescription drug benefit (not health benefits) is not “creditable” as Medicare defines it.
--You never enrolled in Medicare Part D when first eligible.
The lesson is: If you are age 65 with full-time benefits (either from yourself or your spouse), your plan must tell you each year if your drug coverage is “creditable.” If you do not receive this notice by September, contact your employer’s HR department to request it.
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