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Medicare Drug Coverage

Published by Mike Lovell on

Do I really need Medicare drug coverage?

Many people starting Medicare ask if they need a drug plan.  It’s a common question for people that aren’t taking any prescriptions.  Or they are only taking generic medications that cost very little to fill even without insurance.

If this is you, you may be wondering why you should pay for something you don’t think you will use?

But the bottom line for everyone that uses Medicare for their insurance is YES, you do need prescription coverage.  If you don’t, then you are putting yourself at risk for a penalty later.

Like I said, you should have some form of drug coverage.  But that doesn’t necessarily mean you need to have a Medicare Part D plan.  There are other forms of drug coverage that are at least as good.  And they may cost you less in premium.

Medicare drug coverage

You can get your Medicare drug coverage in 1 of 2 ways.

  1. Prescription Drug Plan

This is known as Medicare Part D.  It is a stand alone drug plan because it only offers drug coverage.

  1. Medicare Advantage with Prescription Drug coverage

Many Medicare Advantage plans include prescription drug coverage into one plan for you.  These must meet Medicare’s minimum standards for drug plans.  But they are considered an all in one solution because they include your medical coverage as well as prescriptions.

Creditable drug coverage

Medicare says that if you decide not to get Medicare drug coverage when you’re first eligible, you’ll likely pay a late enrollment penalty if you join later.

Unless:

  • You get Extra Help
  • You have other creditable prescription drug coverage

Other creditable prescription drug coverage is defined as:

“Prescription drug coverage that’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage.”

People who have this kind of coverage when becoming eligible for Medicare can generally keep that coverage without paying a penalty, if they decide to enroll in Medicare prescription drug coverage later.

Examples of Creditable Drug Coverage

These are some of the most common examples of creditable drug coverage that people have access to other than Medicare drug plans.

VA benefits

TRICARE

Employer or Union (you or your spouse are still working)

SeniorCare – This is only for Wisconsin residents.

If you have access to one of these options, then you can still get Medicare drug coverage.  But it would be wise to compare the options before enrolling.  Because you may want to have both or only one.  The only way to know for sure is to run a comparison and see what the total costs are for you.

Late Enrollment Penalty

If you decide not to enroll in Medicare drug coverage and you do NOT have creditable drug coverage then you need to be prepared for what happens in the future.

Because nothing happens immediately.

But your late enrollment penalty starts to add up with each month you do not have creditable coverage.  The penalty is an extra 1% for each month you do not have creditable coverage.

That’s 12% each year.

But this isn’t something you pay right away.  You only pay if you decide to later enroll in Medicare drug coverage.  Then you will pay the extra amount each month, for as long as you have Medicare drug coverage.

Here’s an example:

Let’s say you decide not to enroll in drug coverage when turning 65 and you don’t have creditable coverage.  5 years go by and you start taking an expensive medication so you decide to enroll in Medicare drug coverage.

Your penalty would be calculated by taking 60 months (5 years) multiplied by 1%.  So your late enrollment penalty would be an extra 60%.  That is on top of the national average prescription drug cost for that year.  This does vary but in recent years has been around $35 month.

This penalty applies even if you take out a prescription drug plan that costs less than the national average.

Now what?

Prescription drug coverage can be confusing for a lot of people.  And making the wrong decision can have long lasting impacts.  So if you don’t feel comfortable navigating this on your own, please reach out to me right away.

My services are free, and there’s no obligation.

That way, you’ll know you’re making the right decision for now and the future.  You can call me directly at 855-712-7316 or email at Mike@askMedicareMike.com