Medicare defines “creditable coverage” as coverage that is at least as good as what Medicare provides. As such “creditable drug coverage” is as good or better than Medicare Part D.
Here is why creditable drug coverage matters in Medicare
Having creditable with any current non-Medicare may allow you to delay enrolling in Medicare and avoid any Part D late enrollment penalty. This penalty can occur if you enroll in Medicare Part D plan after your Initial Enrollment Period (IEP) ends and you did not qualify for an exception.
To delay Part D enrollment without penalty:
- Obtain a written “notification of creditable coverage” from your previous plan
- Qualify for a Medicare Special Enrollment Period
- Enroll in a Part D plan within 63 days of leaving the former plan that has creditable drug coverage
Most often this is a situation seen in people that plan to keep working past 65 and as a consequence continue on their employer’s health insurance drug plan. In these cases, the individual will want to talk with their benefits administrator to confirm the plan currently has creditable drug coverage.
How much is the Medicare Part D late enrollment penalty?
The penalty is 1% of the premium amount for each month you’re late. And you will incur the penalty for as long as you have Part D.
For example, if you enroll in a Part D plan that starts on September 1 but your IEP ended March 30 you are signing up for Part D five months late. Therefore your penalty would be 5% of the premium for as long as you are enrolled in Part D.