3 key things to know about Medicare Part D
- Part D helps you pay for self-administered prescription drugs. You can sign up for Part D when you enroll in Medicare Part A and/or Part B. Alternatively, you can skip Part D and go with a Medicare Advantage plan with drug coverage included.
- Part D is optional. While prescription drug coverage through Part D (or Medicare Advantage with drug coverage) isn't mandatory, there are no other options with traditional Medicare for help with prescription drugs after age 65.
- If you don't sign up for a prescription drug plan (PDP) on time, it can cost you. Sign up after your initial enrollment period or after a special enrollment period ends, and you can face a permanent late penalty.
What Part D does not cover?
- Drugs used for weight loss/gain, fertility, erectile dysfunction, and cosmetic effects
- Non-prescription drugs (over the counter medications)
- Vitamins
- Insulin (when used with an insulin pump)
- Inpatient drugs (these may be covered by Part A)
- Drugs not listed on a PDP's formulary (list of covered drugs)
How and when do I sign up for Medicare Part D?
You can sign up for a prescription drug plan with a private health insurance company that offers them through their website, over the phone, or with a licensed agent. When you can sign up is a little more complicated.
Just like Medicare Part A and Part B, you can enroll in Part D during your Initial Enrollment Period (IEP). That's up to 3 months before and up to 3 months after your 65th birthday. You can also enroll during a qualifying Special Enrollment Period (SEP), such as when you or your spouse’s employer-based health coverage ends.
How to avoid Part D penalties?
If you sign up for a Part D plan after your IEP or SEP, a permanent penalty—potentially adding up to thousands of dollars over your lifetime— gets tacked on to your monthly premium. The penalty amount can change each year as well.
You can avoid the penalty if you show proof of creditable drug coverage during the time you were supposed to sign up. If you had acceptable coverage includes a prescription drug plan through an employer (yours or your spouse's).
If you don't sign up for a prescription drug plan on time, and you don't have proof of creditable drug coverage, you also have to wait until the next open enrollment period (October 15–December 7 each year) to sign up. Your coverage starts shortly after you enroll (on January 1) and will include the premium penalty.
How Part D penalties are calculated?
Medicare doesn't charge a flat rate penalty for enrolling late. Instead, the amount is determined by multiplying the number of months an individual went without a Medicare drug plan (or creditable drug coverage) by 1% of the national base premium, the premium rate Medicare establishes for Part D each year.
For example, if you delayed signing up for Part D for 5 years, you would face a 60% penalty (60 months × 1%). The penalty amount is rounded to the nearest $0.10 and added to your monthly Part D premium. There is no cap on the Part D penalty.
Since the national base premium changes every year, so does the Part D penalty. For more about Part D penalties, visit Medicare.gov.