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How Do I Add Part D to Medicare?
By Donna Frederick
Sep 02, 2020
One of the main frustrations with Original Medicare is that it doesn’t offer any prescription drug coverage. Although Medicare health insurance plans offer a lot of coverage, there is no way to get prescription drug coverage through your main Medicare plans. However, Part D plans are an easy and affordable way to get prescription drug coverage and an option that many seniors consider.
If you want to add a Part D prescription drug plan (PDP) to your Original Medicare, you aren't free to do so at any time. Like Original Medicare, Part D plans use enrollment periods that limit when you’re able to enroll without facing penalties. Understanding how to add a Part D plan to your Medicare coverage is important if you don’t want to have to pay these penalties later on.
What is Medicare Part D: How Does it Work?
Part D offers Medicare prescription drug coverage. Importantly, these plans are offered by private insurance companies, not the federal government. This means that unlike Part A and Part B, there is a variety to the coverage: not every plan is the same. When you look at a plan, make sure that you understand their formulary, or the list of drugs that they cover. This will ensure that you get the coverage that you need.
Medicare prescription drug plans vary in cost just as much as drug costs do, but there is an additional amount that you will have to pay depending on your income. You can find the details for this income-adjusted payment at medicare.gov. In general, premiums will be somewhere between $30-50 each month, but this can vary widely depending on your age, location, and other factors.
Because they are private plans, Part D plans will function as either HMO or PPO plans. This means that you will need to understand the specific provider network limitations and coverage area for the plan that you choose. If you move out of the service area, you will usually be able to switch to a new plan with no penalty.
Enrolling in Part D: The Initial Enrollment Period
Three months before you turn 65, you will enter the Initial Enrollment Period (IEP). During this seven month long period, you will be able to enroll in Medicare Part A, as well as Medicare Part B and Part D without any late penalties. This period begins three months before your birthday month, includes your birthday month, and lasts for three months after, for a total of seven months.
During this time, you may be automatically enrolled in Original Medicare if you are collecting Social Security, unless you specifically take steps to halt your enrollment. During your IEP, you can enroll in a Part D drug plan for the first time without facing any late penalties. If you enroll in a Part D plan after your IEP ends, then you may have to pay a Late Enrollment Penalty (LEP). However, there are some situations in which this can be avoided, which we’ll discuss below.
Enrolling During the Open Enrollment Period
The Open Enrollment Period (OEP), also known as the Medicare Advantage and Prescription Drug Plan Annual Enrollment Period, lasts from October 15th to December 7th each year. During this time, you’ll be able to enroll in a Part D plan, but you may have to pay the late penalty if you’re enrolling late. When you enroll during the Open Enrollment Period, your coverage will begin on January 1st of the following year.
Understanding the Part D Late Enrollment Penalty
If you enroll in a Part D plan after your Initial Enrollment Period, you may have to pay a Late Enrollment Penalty. This penalty is an additional monthly fee that you pay along with your premium each month: it is not a one-time fee. Although the Late Enrollment Penalty fee may not amount to much each month, the fact that there is no way to get rid of it means that it can end up costing you a lot of money over time.
The math that is used to calculate the Late Enrollment Penalty is a bit complex, and you can find full details here. For most people, it will amount to somewhere between $10 and $20 per month, in addition to your usual monthly premium, for the entire duration of your coverage. This depends on a variety of factors, including how long you’ve delayed getting Part D coverage.
How to Not Pay the Late Enrollment Penalty
As you can see, the Late Enrollment Penalty is not something you want to have to pay. In general, enrolling in a Part D drug plan after your Initial Enrollment Period will result in having to pay this penalty, but there are several exceptions. We’ll go over these step-by-step.
If You Have Creditable Prescription Drug Coverage
If your Initial Enrollment Period comes and goes, but you have creditable health care coverage until you transition to a Part D plan, you won’t have to pay the Late Enrollment Penalty. Creditable coverage refers to coverage that is as comprehensive as Part D plans are required to be. The details won’t matter too much for most people, and the best way to find out is to inquire with your employer or your health plan directly; they will be able to tell you if your coverage is creditable.
If you enroll in a Part D plan after your creditable coverage ends, whether using a Special Enrollment Period or an Open Enrollment Period, you won’t have to pay the Late Enrollment Penalty.
Triggering a Special Enrollment Period (SEP)
When it comes to Medicare enrollment, Special Enrollment Periods are periods during which you can enroll in Medicare with no penalties. These periods will vary somewhat for the parts of Medicare and are unique to each person. They are triggered by things such as losing employer-based coverage or moving out of a coverage area. The basic idea behind Special Enrollment Periods is to make sure you don’t get punished with penalty fees due to things that are outside of your control.
If you are covered by an employer-based prescription drug plan during your Initial Enrollment Period, and later lose it, you may trigger an SEP. This can also be triggered by qualifying for Extra Help.
Extra Help for Part D
If you’re enrolling in Part D, make sure to understand your options for Extra Help. Extra Help is a program for low-income Medicare beneficiaries and helps to cover your Part D premiums, deductibles, coinsurance, and other out-of-pocket costs.
You will usually be notified that you qualify for Extra Help by Social Security or by Medicare directly. If you receive one of these notices, you can show them to your insurance company, which will then alter your plan following the Extra Help guidelines. The details will vary depending on your exact situation, but it will result in you paying less.
You will also be eligible for Extra Help if you receive Medicaid. If you have a Medicaid card from CMS or other documentation that shows that you have Medicaid, you can use this to show to your plan. Different plans accent different documents as proof that you qualify for Extra Help, so make sure to double-check with your specific plan about what you need.
If You Have Medicare Advantage
If you have a Medicare Advantage plan that covers prescription drugs, you won't be able to enroll in a Part D plan at the same time. If you disenroll in your Medicare Advantage plan during the Open Enrollment Period, you will have from January 1st to March 31st to enroll in a stand-alone plan. Because many Part C plans cover prescription drug coverage, many beneficiaries don't need to enroll in a stand-alone Part D plan when they have Medicare Advantage.
If your Medicare Advantage plan had prescription drug coverage, then make sure you do enroll in a stand-alone prescription drug plan when you disenroll from your Part C plan. If you don't, you may have a coverage gap.
Options for PFFS and MSA
If you are enrolled in a Medicare Savings Account or Private Fee-for-Service plan, you may already have prescription drug coverage. If not, you will be able to enroll in a Part D plan as usual. The same restrictions will apply, so make sure you enroll on time.
Can Medigap Plans Help?
Medigap plans, also known as Medicare Supplement Plans, provide extra coverage for Original Medicare. These plans help cover your out-of-pocket costs, like co-pays, coinsurance, and so on. While you will usually have copayments, deductibles, and coinsurance payments for your Part D plan, Medigap plans don't apply to Part D plans, only to Original Medicare.
Part D: Where to Go Next
Most of this article assumes that you’ve already looked into which Medicare Part D plan to get. Because these plans vary a lot, make sure to do your research before you commit to a plan. Once that is done, make sure to enroll during a proper enrollment period, so you avoid the late penalty. This is going to be your main concern with Part D enrollment, so make sure to take it seriously!
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