Coping With the Medicare Part D
May 15 is the deadline for enrolling in a Medicare Part D prescription drug plan for 2006.
After May 15, unless entitled to a Special Enrollment Period, discussed below, Medicare beneficiaries will be assessed a late enrollment penalty for every month in which they could have enrolled but did not. The next annual enrollment period will begin November 15, 2006, for coverage beginning January 1, 2007. Beneficiaries who are currently eligible to enroll in a Part D plan and do not enroll until the open enrollment period next fall will be assessed a 7 month late enrollment penalty.
This Alert discusses:
A newly released policy to not require collection of the late enrollment penalty for 2006 for all individuals found eligible for Part D’s “extra help,” also called the low-income subsidy;
The calculation of the penalty for those for whom it is not waived;
Special enrollment periods, and
Suggested ways to proceed for those who have not yet enrolled in a Part D plan.
Late Enrollment Penalty and rolling Special Enrollment Period for those with Low Income Subsidy (Extra Help)
On May 9, the Centers for Medicare and Medicaid Services (CMS) announced its intention to not require plans to collect a late enrollment penalty for the rest of 2006 for all people receiving the low income subsidy. This statement clarified earlier policy statements in which CMS had granted an ongoing Special Enrollment Period for 2006 for low income subsidy beneficiaries, but had not addressed the application of the penalty. These policies are both important since the low income subsidy has not yet reached even half of its targeted audience and many people with limited incomes may be reluctant to enroll in a Part D plan until they know whether they are eligible for the extra help to pay for it. These two policies apply to beneficiaries who receive either full or partial subsidies and are intended to allow them to enroll in a Part D plan for 2006 at any time before the end of the year without having a premium penalty collected from them. However, it is important to note that the policies do not prohibit plans from collecting the penalty.
Calculation of the late enrollment penalty
For those without the benefit of the policies described above, unless they currently have creditable coverage (coverage as good as Medicare) through an employer, a union, or other source, a penalty of one percent (1%) of the national average premium will be assessed to their future monthly Part D premium for every month in which they are not enrolled in a Part D plan. The national average premium for 2006 (it will vary each year) is $32.20. Thus, the penalty for not enrolling at all in 2006 will be $2.24 (7 months @ $.32/month). This amount will be added to the individual’s future monthly Part D premium, in perpetuity. Note that the penalty is not based on a percentage of the premium of the plan in which the individual is enrolled, but on the national average. This average will change yearly, so the penalty for not enrolling in Part D may well be greater in 2007 and beyond.
Beneficiaries with drug coverage from another source should have received a letter last November telling them whether their coverage is creditable (as good as Medicare) so that they can retain that coverage without incurring a Part D late enrollment penalty. Federal Employee Health Benefits Program (FEHBP), TRICARE (health benefits for the military) and Veterans Benefits are all creditable coverage. Standard Medigap policies with prescription drug coverage are not creditable. Beneficiaries should check with their existing plan if they are not sure if their coverage is as good as Medicare.
Generally, the late enrollment penalty applies to any person for whom there is a period of 63 days or more after their initial enrollment period during which they are eligible for Part D, who does not have creditable coverage under another plan and who is not enrolled in a Part D plan.
Special Enrollment Periods
After the Initial Enrollment Period (November 15, 2005 through May 15, 2006), individuals in specific circumstances will have special enrollment periods during which they can change plans outside of the Annual Enrollment Period. Special Enrollment Periods exist for:
Individuals enrolled in the low income subsidy program after May 15, 2006, at least for the 2006 benefit year, as discussed above;
Those who involuntarily lose creditable coverage or who were given incorrect information about whether their coverage was creditable;
Individuals who rely on incorrect information from a Federal government employee;
Individuals eligible for both Medicare and Medicaid, including those eligible to have Medicaid pay for their Medicare cost-sharing only;
Individuals in a plan whose contract is terminated;
Individuals who can show their plan violated a material provision of its contract with CMS;
Individuals moving out of the service area of their plan; and
Individuals moving into, residing in or moving out of a long-term care facility.
How to proceed in the face of the May 15 deadline
Generally speaking, Medicare beneficiaries without creditable coverage should enroll in a plan before May 15. Each region of the country has between 27 and 52 freestanding prescription drugs plans (PDPs) and additional Medicare Advantage Plans with Prescription Drug coverage (MA-PDs).
Beneficiaries with low drug costs should look for a low premium plan. Every region has a plan with a premium under $20/month. Plan coverage will be of less concern to such individuals for the present; should their circumstances change, they can choose a new plan in November for 2007.
Those who fail to enroll in a plan before May 15 should not be terribly concerned. The penalty for 2006 will be $2.24/month added to future premiums. But since the penalty will continue to increase for each additional month after 2006 that the beneficiary does not enroll, the decision should not be postponed indefinitely. The 2007 enrollment period will run from November 15 through December 31, 2006.
People with small incomes (about $1225/month for an individual) and few assets (not more than $10,000 for an individual, not including house, vehicles and household possessions) who have not applied for the low income subsidy can do so at any time during the year; those found eligible will have a Special Enrollment Period for the remainder of 2006 and will have no penalty collected from them.
For more information, contact attorney Patricia Nemore in the Center for Medicare Advocacy’s Washington, DC office at (202) 293-5760.
Copyright © Center for Medicare Advocacy, Inc. 08/19/2013