Medicare Prescription Drug Penalty Confusion!!

Hello Toni:

Turned 65 in August 2018, continued to work full-time with an HSA that has a $3000.00 deductible before any prescriptions or medical claims are paid by the insurance plan.  The HR manager of my employer advised me to enroll in Part A when I turned 65. Because I received the wrong information, I could not fund my HSA from that time.

I decided to delay Part B until December 1^st when I retired and enrolled in a Medicare supplement plan G and a Part D prescription drug plan also with a January 1^st start date.

I have received a notice from CMS (Medicare) saying they do not have a record of me having prescription drug coverage that “met Medicare’s minimum standards from 8/1/2018 to 12/31/2020 and I may receive a Part D late enrollment penalty. What does this mean?

I thought applying for Part B kept me from a penalty. I do not understand any of this!  Thank You, Claude from Dallas, TX

Claude:

I hate to inform you, but you have a Medicare problem! Your HSA health plan had a deductible of $3,000 which is more than the $445 Medicare Part D deductible for 2021 and you may not have met Medicare’s minimum standards.

Claude, the letter you received from the Medicare Part D plan that you enrolled in, explains what you should do to inform Medicare what prescription drug coverage you have had by either calling an 800 number or has a form describing what type of coverage you had which you can mail back to the Medicare Part D plan you enrolled in.

The Medicare & You handbook states: “Creditable” prescription drug coverage could include drug coverage from a current or former employer or union, TRICARE, Indian Health Service, the VA, or health insurance coverage.  Your plan must tell you each year if your drug coverage is “creditable coverage”.  This information may be sent to you in a letter or included in a newsletter from the plan.  Keep this information because you may need it when or if you join a Medicare drug plan late.”

Claude…Did you receive such a letter informing you of “creditable coverage”? Creditable drug coverage should “meet or exceed” what Medicare’s Part D plan minimums are for that current year.

Your late enrollment period (LEP) does not begin from the day you lose or leave your company health plan, BUT from the month that your Medicare Part A started, and your Medicare Part A began when you turned 65.

This LEP (late enrollment period) penalty can be because:

• You waited past 63 days without creditable prescription drug coverage when you are leaving company benefits and you are older than 65 years old and 90 days. Do not wait past 63 days to get Part D when leaving company health plans.
• Your company prescription drug benefits (not health benefits) are not creditable as Medicare declares. Claude, this is your situation.
• You simply never enrolled in Medicare Part D when you were first eligible and want to enroll.

Americans retiring after 65 with employers’ benefits and taking the “Request for Employment Information CMS L-564” form to Social Security to avoid the “famous” Medicare Part B penalty need to realize that this form only informs Medicare that you have had employer benefits since turning 65. The form does not inform Medicare that you had “creditable” prescription drug coverage.

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