Medicare Part D is the federal program that provides Medicare beneficiaries the opportunity to receive prescription drug coverage. Private insurance companies contract with Medicare. There are two types of Medicare plans that provide prescription drug coverage:
- Stand-alone Medicare Part D Prescription Drug Plans are designed to work in conjunction with Medicare Part A and/or Part B coverage.
- Medicare Advantage Prescription Drug plans combine health (Medicare Part A & Part B) and prescription drug coverage (Medicare Part D) in a single plan.
Medicare prescription drug coverage is optional. However, the cost of prescription drugs may be a strong incentive for enrolling in a Medicare plan that provides prescription drug coverage, and you may face a late-enrollment penalty if delayed.
While there are both pros and cons to delaying Medicare Part D prescription drug coverage, it is important to be aware of potential costs you could incur by not signing up for coverage from a stand-alone Medicare Part D Prescription Drug Plan or Medicare Advantage Prescription Drug plan when you are first eligible for Medicare coverage.
Medicare Part D prescription drug coverage often includes out-of-pocket expenses, such as premiums, deductibles, and copayments/coinsurance. However, paying for prescription medications can be extremely expensive without drug coverage—particularly if you develop a health condition that requires extensive treatment involving medications. The out-of-pocket costs may easily cancel out any money saved from not enrolling in a Medicare plan providing prescription drug coverage.
The choice to enroll in or delay Medicare Part D coverage can be a difficult decision for healthy beneficiaries who don’t currently take medications. They must weigh the cost of monthly premiums and cost-sharing expenses versus the risk of waiting until they need prescription drug coverage and paying a lifetime Part D late enrollment penalty.
Here are some of the pros and cons to delaying Medicare Part D enrollment.
Pros of delaying Medicare Part D enrollment
You may not need Medicare Part D if you already have other creditable prescription drug coverage. Creditable coverage is prescription drug coverage that is expected to pay at least as much as standard Medicare Part D coverage. It might include:
- Employer or union group coverage
- Veterans’ benefits
- Federal employee benefits
- Marketplace health insurance
In this case, it may make sense for you to delay Part D to avoid paying an extra premium for coverage you already have. If you have prescription drug coverage through your current or former employer’s or union’s group health plan, you can enroll in a Medicare plan that provides prescription drug coverage up to eight months after your coverage ends, using a Special Enrollment Period. You will not pay a late enrollment penalty in this case.
Please note that COBRA and Medigap insurance do not count as creditable coverage.
Cons of delaying Medicare Part D enrollment
The most significant risk of delaying enrollment in a Medicare plan providing prescription drug coverage is that you could incur substantial costs for medications if you become ill or injured and you are without prescription drug coverage. Note: there are set time periods during which Medicare beneficiaries may enroll in Original Medicare and Medicare plan options. If you did not enroll in a Medicare Part D Prescription Drug Plan during your Initial Enrollment Period, you may have to wait until the next Annual Election Period to enroll and will have to pay the full cost for all prescription drugs until then.
In addition, you may have to pay a late enrollment penalty for Part D if you did not enroll in a Medicare plan providing prescription drug coverage when you were first eligible, and you did not have other creditable prescription drug coverage for 63 consecutive days or more. This penalty is added to your monthly Part D premium, and you may have to pay it for as long as you have Medicare prescription drug coverage. The Part D penalty is the number of full months you were eligible for Part D prescription drug coverage but didn’t enroll in a Medicare plan providing this coverage and didn’t have other creditable coverage, multiplied by 1% of the national base beneficiary premium, which is $35.02 in 2018. If you qualify for the Extra Help program, you won’t need to pay the Part D late enrollment penalty.
Healthy Medicare beneficiaries may be tempted to wait until they need to take medications to enroll in a Medicare plan providing prescription drug coverage. Because future prescription drug costs and health needs can be difficult to predict, it is typically safer for beneficiaries to enroll in a stand-alone Medicare Part D Prescription Drug Plan (or a Medicare Advantage Prescription Drug plan) as soon as they are first eligible, even if they are currently not taking medications.
To be eligible to enroll in Part D, you must have Medicare Part A and/or Part B and live in the service area of the Medicare Part D Prescription Drug Plan in which you wish to enroll.