Recently I enrolled a new client into a Prescription Drug Plan (Part D Medicare coverage). She was very happy with the plan that covered all of her medications effectively, but after she received her first premium billing she called me in a state of panic- ” What is this penalty I am being accessed? Why do I have to pay an extra $30.00 a month on top of my premium? THIS IS WRONG!!!.”
The Part D penalty imposed by Medicare’s rules is not only confusing to most folks, but in many cases people are totally unaware of it’s implications. In the situation described this client, who was in her late 80s was totally unaware of the rule that produced an unrevocable penalty.
Here in a nutshell is the Medicare regulation: When an individual ” ages in ” to the Medicare program (in most cases turn age 65) they have a limited time to sign up for Prescription Drug coverage to avoid a lifelong penalty that continues to grow each month, unless they can prove they have creditable coverage from some other source. There is a seven month time period (three months before your birth month, your birth month, and three months afterwards) to sign up for Medicare coverages. You have 63 days after this time period ends to sign up for part D or you are subject to a penalty which seems small at first as it is only 1% of the national average premium base (Around $30) or about 30 cents monthly. But this quickly gets costly as 30 cents (or more) per month can grow through the years to more than what the carrier’s premium would be. That is permanent and non-cancellable.
So, what is creditable coverage? Simply, it is coverage that is expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. Employers and unions who provide medical coverage to their employees must explain their programs on a regular basis to the goverbnebt to explain their coverage qualifies for this designation. There are other resources such as Military coverage that can qualify as being creditable. Again, if a person loses that creditable coverage they then have a very limited time (63 days) to enroll in a qualified program with a Medicare carrier.
- Lou Reinitz LJR Insurance Solutions LLC