Yes, Medicare Part D is optional; however, late enrollment penalties may apply if you miss the Initial Enrollment Period and go 63 days or more without prescription drug coverage.
Obtaining Medicare Part D Benefits
Medicare Part D benefits can be purchased in one of the following ways:
- A stand-alone Medicare Prescription Drug plan.
- Medicare Advantage Prescription Drug plan
Both are offered through private insurance companies.
Eligibility for Medicare Part D
Eligibility is determined by the following requirements:
- You are already enrolled in Medicare Part A or Part B.
- You are 65 years or older.
- You live in the service area that the plan you have selected covers.
When to Enroll in Medicare Part D
Initial Enrollment Period
An Initial Enrollment Period for Medicare Part D usually begins at the same time that the Initial Enrollment begins for Medicare Part B. That is, it begins three months prior to your 65th birthday and runs for three months following your birthday. If eligible for Medicare Part A or Part B because of disability, your Initial Enrollment Period will begin on your 65th birthday.
Annual Election Period
If you do not enroll during the Initial Enrollment Period, your next option is to enroll during the Annual Election Period. This period begins October 15 and runs through December 7. In addition to signing up for Medicare Part D, you can also substitute plans during this time or disenroll from your plan. Keep in mind that you will need to pay a late-enrollment penalty if you do not sign up during the Initial Enrollment Period and do not have another form of prescription drug coverage (called creditable prescription drug coverage) for 63 consecutive days.
Medicare Advantage Disenrollment Period
Some people use the Medicare Advantage Disenrollment Period to sign up for Medicare Part D. These are the individuals who had been using Medicare Advantage (which often includes prescription drug coverage) and are switching to Original Medicare (Part A and Part B). Because Original Medicare does not include drug coverage, Part D will be necessary. The disenrollment period begins on January 1 and runs through February 14.
Special Election Period
Only those with special circumstances are able to sign up for a new prescription drug plan outside of the Initial Enrollment Period or Medicare Advantage Disenrollment Period. The special circumstances include the following:
- Relocating outside of the plan service area
- Moving into a nursing home
- Losing eligibility
Creditable Prescription Drug Coverage
Creditable prescription drug coverage is insurance, in addition to Medicare, that is comparable to the average Medicare Prescription Drug plan. This includes:
- Employer-based health insurance
- United States Department of Veteran Affairs health insurance
- Indian Health Service
If you do have creditable prescription drug coverage in lieu of Medicare Part D or Medicare Advantage, you will not have to pay a penalty.
The Late-Enrollment Penalty
You will incur a late-enrollment penalty if you go 63 consecutive days without creditable prescription drug coverage. This could happen if you missed the Initial Enrollment Period or if you lost your creditable prescription drug coverage and there is a gap of time before you sign up for a new plan. This penalty will be added to your premium.
The penalty process is as follows:
- First, the number of "gap" months are counted. This is the number of months that you were eligible but not enrolled in a Medicare Part D or Medicare Advantage plan.
- The administrators of your Medicare Prescription Drug plan will next ask you if you did have creditable coverage during this time.
- If you did not have creditable coverage for 63 consecutive days, the Medicare Prescription Drug plan is required to report the number of months without coverage.
Calculating the penalty is as follows:
- Multiply 1% of the "national base beneficiary premium" by the number of "gap" months. The "national base beneficiary premium" was $35.02 in 2018.
- This number is rounded to the nearest $.10.
- The final amount is added to the premium charged for your Medicare Prescription Drug plan.