While people have the freedom to choose between a variety of Medicare plans, there are some restrictions built into the system. The Late Enrollment Penalty (LEP) for Medicare Part D is one of those restrictions.
When someone approaches their 65th birthday, it’s important for them to understand the rules regarding enrollment in Part D. Enrolling at the right time could save money for years to come.
What is the Medicare Part D Late Enrollment Penalty (LEP)?
The Medicare Part D late enrollment penalty is assessed for beneficiaries who go 63 or more days without qualifying prescription drug coverage after their Medicare initial enrollment period. The penalty is added to the monthly Part D premium if those beneficiaries enroll in a Part D prescription drug plan later.
If you never enroll in Medicare Part D, you will never have to pay the LEP. The penalty is added to your monthly premiums if you do decide to join a plan. You will pay the added penalty if you have Part D benefits, so it doesn’t expire with time.
How Much is the Part D Late Enrollment Penalty?
The Medicare Part D late enrollment penalty is an individual calculation based on the following factors:
- National Base Beneficiary Premium – The base premium for all beneficiaries nationwide is determined annually by the federal government. It’s based on bids placed by prescription drug plan insurers.
- Length of Time Uninsured – The penalty increases every month that you remain without adequate prescription drug coverage.
Medicare will first determine how many months you went without adequate prescription drug coverage. Your penalty will equal 1% of the current National Base Beneficiary Premium, times the number of months you were deemed uninsured.
When are You Required to Enroll in Medicare Part D?
You should enroll in Medicare Part D when you enroll in Medicare Parts A and B.
You will receive an initial enrollment period that spans seven months around the month in which you turn 65. The period starts three months prior to your birthday month and ends three months after your birthday month.
You can add a Part D plan during the Medicare annual open enrollment period, which runs from October 15 to December 7 every year. If you went more than 36 days outside of your initial enrollment period without qualifying alternative drug coverage, your premium will reflect your late enrollment penalty.
Why is the Part D Late Enrollment Penalty Charged?
The federal government deems prescription drug coverage essential to healthcare for senior citizens. The LEP for Part D is the government’s way of encouraging all Medicare beneficiaries to maintain adequate coverage.
How to Avoid the Late Enrollment Penalty for Medicare Part D
The easiest way to avoid the Part D late enrollment penalty is to enroll in a prescription drug plan when you first enroll in Medicare Part A and Part B. If you have coverage for prescription drugs through an employer, union, or another source, make sure it meets at least the minimum benefits offered by Medicare prescription drug plans. That is the standard used to determine what insurance is a suitable replacement for Part D.
If you lose your alternative prescription drug coverage, make sure you enroll in a Part D plan right away. If you wait too long, you may still have to pay the LEP because you went without adequate coverage after your plan expired.
You may also avoid the LEP by qualifying for Medicare Extra Help prior to enrolling in Part D. Extra Help is a program designed to help low-income beneficiaries pay for premiums, deductibles, and other out-of-pocket expenses that come with prescription drug plans. If you qualify for Extra Help, the Part D late enrollment penalty is waived.
How to Appeal the Late Enrollment Penalty for Medicare Part D
If you’re assessed the LEP for Part D and it isn’t justified, you can appeal the decision. Keep in mind that there are only two arguments likely to result in a favorable outcome:
- You enrolled in Part D during your initial enrollment period and should not have to pay the penalty.
- You had credible prescription drug coverage through an employer, union, or another valid source and did not go 36 days or more without adequate coverage. You should have documentation showing proof of coverage for the alternative policy, including the dates you were enrolled.
Not wanting prescription drug coverage when first eligible isn’t an adequate appeal and is most likely to receive a rejection. The only way out of the penalty is to prove that you were adequately covered and never went 36 months without qualifying coverage.
If you believe you have a legitimate appeal, you can ask for what Medicare calls a “reconsideration.” You can request the form for reconsideration from your drug plan. It will include a street address and/or fax number where you can submit the form to C2C Innovative Solutions, which is the contractor authorized to review and make decisions on these appeals.
If your plan doesn’t have a form, you can fill out the LEP Reconsideration Request Form online.
While waiting for a reconsideration decision, you must continue to pay your Part D premium, including the penalty. You will lose your coverage if you don’t pay all premiums.