Medicare defines “creditable coverage" as coverage that is at least as good as what Medicare provides. Therefore, creditable drug coverage is as good as or better than Medicare Part D.
Why Creditable Drug Coverage Matters in Medicare
Creditable drug coverage matters because it may allow you to delay enrolling in Medicare and avoid the Part D late enrollment penalty. The penalty is charged if you enroll in a Medicare Part D plan after your Initial Enrollment Period (IEP) ends and don’t qualify for an exception.
The Part D penalty can sneak up on you if don’t know the rules. Here's a summary of what you need to do to delay Part D enrollment without penalty:
- Make sure you can qualify for a Medicare Special Enrollment Period.
- Get a written "notification of creditable coverage" from your previous plan.
- Enroll in a Part D plan within 63 days of losing or leaving your former plan and/or the former creditable drug coverage.
Typically, this situation is seen most for people who plan to keep working past 65. If you are working past age 65 and plan to delay Medicare enrollment, talk with your employee benefits administrator. He or she can tell you if your employer plan provides creditable drug coverage.
How Much is the Medicare Part D Late Enrollment Penalty?
The late penalty for Medicare Part D is an additional 1 percent of the premium amount for each month you’re late. You pay the penalty for as long as you have Part D.
For example, you enroll in a Part D plan that starts on November 1 but your IEP ended on June 30. As a result, you are four months late signing up for Part D.
Your Part D penalty would be 4 percent of the premium because you signed up four months late.
How to Get Medicare Part D Coverage
You can get Medicare prescription drug coverage in a stand-alone Part D plan or as part of a Medicare Advantage plan (Part C). Private insurance companies offer the plans under contract with Medicare.
You will need to have Part A and/or Part B to get a stand-alone Part D plan, and you will need both Parts A & B to get a Medicare Advantage plan.