Unlike Part A and Part B, Medicare Part D is an optional benefit that sits outside Original Medicare. When Medicare recipients first become eligible, they may think drug coverage is merely additional insurance they do not need or cannot afford. However, even if you are healthy and presently do without prescription medication, it is advantageous to sign up as early as you can rather than defer and incur a late enrollment penalty.
Once eligibility for Medicare begins, there is an initial enrollment period. This is a seven-month time frame that starts three months before the month of your 65th birthday, continuing through the month of your birthday and ending three months following the month the candles are blown out. During this period, you would sign up for parts A and B with the option to sign up for Part D as well.
If you carry neither Part D nor continuous creditable prescription drug coverage for 63 or more days following the end of the initial enrollment period, expect a penalty to be imposed upon signing up for Part D in the future. Creditable prescription drug coverage means you already have a plan that provides coverage at the same level or more than the Medicare standard. If your plan meets this criteria and you prefer to keep it, you may be able to do so and avert the Plan D late enrollment penalty should you lose your other coverage later.
The late enrollment fee, according to Centers for Medicare & Medicaid Services (CMS), is 1% of the national base beneficiary premium for every month there is a lapse in insurance. For 2020, the base beneficiary premium is $32.74. To illustrate this, suppose you have a gap in creditable coverage for 24 months. The calculation is 1% multiplied by 24, which equals 24%. Multiply 24% by $32.74, which equals $7.86. The product is rounded to the nearest ten cents, which equates to $8.00. In this example, $8.00 would be added to your Part D premium every month, and this will likely continue for the duration of enrollment in Part D even if you change your Medicare drug plan.
How to Enroll in Medicare Part D
To obtain Part D coverage, there are two options. Either enroll in a Medicare Prescription Drug Plan (PDP) or sign up for a Medicare Advantage plan with prescription drug coverage (MA-PD). In both cases, having Part A and Part B is a prerequisite. The difference is that a PDP adds coverage for medication to Original Medicare or another Medicare-approved plan whereas an MA-PD envelops Parts A, B and D. Before you select a Medicare Advantage plan, be sure it includes drug coverage. Many Medicare Advantage plans include it, but coverage and costs can vary between drug plans.