What is a Late Enrollment Penalty?
A Medicare Beneficiary may get a notice from CMS or their Part D drug plan or Advantage plan, saying that they may owe a LEP, Late Enrollment Penalty, related to their new drug coverage premium. That is because there are specific enrollment periods surrounding a Medicare Beneficiary’s Eligibility to sign up for the different parts of Medicare. And if you miss the sign-up period or decide you do not want to sign up when you are first eligible, you will pay more if you ever do decide to sign up for the Medicare coverage.
Medicare Part A does not cost anything for people to enroll in, if they and/or their spouse, have worked in the USA for at least 40 quarters (10 years). But Part B and Part D of Medicare do cost money for most people.
A Medicare beneficiary will also not pay a late enrollment penalty when they do enroll, if they had other coverage that Medicare accepts as Creditable. That means it allows you to delay enrolling in Medicare until the other coverage ends, without a penalty. However, if you sign up late, outside of your initial enrollment period, without having had other creditable coverage, you will pay a penalty for the length of your Medicare coverage going forward, usually meaning for the rest of your life. Please note, you are not penalized if you never sign up for Medicare Part B or a Part D plan. A beneficiary is only penalized at the time they do enroll in a plan.
Why does a Medicare Beneficiary receive a LEP Penalty notice in the mail from their drug coverage insurance company?
- That usually means the insurance company believes the Medicare Beneficiary should have been enrolled in a Part D drug plan, usually the months following their 65th birthday, and is requiring proof of that other coverage.
- Usually this happens when someone was still working and had a group health plan that they chose to remain on after they turned 65, and delayed enrolling in a drug plan for that reason.
- If they have had other Creditable Drug Coverage after they became Medicare Eligible, with a gap no longer than 63 days between coverages, they will not pay a penalty if they provide proof of that coverage. To be considered creditable drug coverage, the other plan must have provided drug coverage as good as the Medicare standard Part D plan coverage. The prior drug company must provide you with a letter of creditable coverage to that affect.
The Medicare Beneficiary must take ACTION if they receive a notice about an LEP
- If the beneficiary receives this letter from their new Drug Company or Advantage plan requesting proof of ‘Creditable Drug Coverage’, they need to act promptly on the request found in that letter to avoid the late enrollment penalty (LEP). Even if they have already submitted proof of creditable coverage when they submitted their enrollment application for the new Medicare plan.
- A call must be made to the number on the letter and confirm this information or mail the requested proof to the number/address specified in the letter.
If the beneficiary did not have another Creditable drug coverage:
- They will be assessed a Part D Late Enrollment Penalty at the time they do sign up for Part D drug coverage.
- The amount of the Penalty is 1% of the cost of the national standard base Medicare Part D plan, for each month they went without creditable drug coverage.
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