Americans spend more than $300 billion on prescription drugs each year. Most people rely on their employer plan to help cover these costs. If you are nearing age 65, it’s not that simple.

Whether you are getting ready to retire or still working, it’s important to begin thinking about Medicare. Enrollment is not mandatory, but if you put it off for too long, you may have to pay more for coverage than you expect.

When Can You Enroll in Medicare?

You can sign up for Medicare Part D (prescription drug coverage) during your initial enrollment period. This is the seven-month period that:

• Starts three months before the month you turn 65
• Includes the month you turn 65
• Ends three months after the month you turn 65

If you enroll during the three months before you turn 65, your coverage will become effective the first day of the month you turn 65. If you enroll the month you turn 65 or sometime during the three months following, your coverage will become effective the first day of the month after you ask to join the plan.

Here are a few examples:

• Sue turns 65 in May. She signs up for coverage in April. Her plan becomes effective May 1.
• Sam turns 65 in July. She signs up for coverage in July. Her plan becomes effective Aug. 1.
• Bill turns 65 in September. He signs up for coverage in October. His plan becomes effective Nov. 1.

If you miss your initial enrollment period, you may sign up during Medicare’s annual enrollment period. This is held each year from Oct. 15 to Dec. 7.

What If You Miss Your Initial Enrollment Period?

If you don’t enroll for Medicare Part D during your initial enrollment period, you may have to pay a penalty. You will owe a late enrollment penalty if you go for any continuous period of 63 days or more without:

• Medicare Prescription Drug Plan (Part D)
• Medicare Advantage Plan (Part C) or another Medicare health plan that offers Medicare prescription drug coverage
• Creditable prescription drug coverage

How Do You Know If Your Coverage Was Creditable?

Each year, your employer must provide all Medicare-eligible individuals covered under the company’s prescription drug plan with notice of whether the plan was creditable or noncreditable. Your employer is also required to report this information directly to the Centers for Medicare and Medicaid Services (CMS).

If you don’t remember receiving the notice, check with Human Resources or your benefits administrator. They can give you a new copy and will be able to tell you if the plan is creditable or not.

How Much Is the Penalty?

Your penalty will depend on how long you did not have the required coverage. Medicare multiplies one percent of the “national base beneficiary premium” by the number of full, uncovered months you didn’t have creditable coverage. The penalty is then added to your monthly premium.

Keep in mind, premiums can change each year. The national base beneficiary premium for 2022 is $33.37.

Let’s look at an example:

Cynthia is eligible for Medicare. Her Initial Enrollment Period ended June 30, 2016. She doesn’t have any prescription drug coverage. She decided to join the plan during open enrollment that ended Dec. 7, 2020. Her Medicare Part D coverage was effective Jan. 1, 2021.

2021 Penalty = $17.90 per month	2022 Penalty = $18.00 per month
1% for each of the 54 months she did not have coverage = 0.54 (54% penalty) x $33.06 = $17.85	1% for each of the 54 months she did not have coverage = 0.54 (54% penalty) x $33.37 = $18.02
$17.85 rounded to the nearest $0.10 = $17.90	$18.02 rounded to the nearest $0.10 = $18.00

How Long Do You Have To Pay The Penalty?

In most cases, the penalty applies for as long as you have a Medicare drug plan.

If you are charged a penalty that you believe is an error, you may be able to ask for the penalty to be reconsidered. Your drug plan will be able to send you the necessary information.

Where Can You Find More Information About Medicare?

Talk to Human Resources or your benefits administrator. They can help you determine when your Initial Enrollment Period is and how to select the right Medicare Part D plan for you.

Have more questions? Connect with us.