Lack of ‘creditable’ drug coverage could incur Medicare Part D penalty

Dear Toni: When I turned 65, I continued to work with excellent company benefits. I delayed enrolling in Medicare Part B for five years, after I turned 70, and retired with a Jan. 1 effective date for my Medicare supplement Plan G and Part D prescription drug plan.

Now I have received a notice from the Centers for Medicare &Medicaid Services saying they do not have record of me having prescription drug coverage that “met Medicare’s minimum standards” from March 1, 2019, when I turned 65 to Jan. 1, 2025, when I retired, and I may receive a Part D late-enrollment penalty.

I thought applying for Part B with that form from my employer attached kept me from a Part D penalty. — Zach, Lake Jackson, Texas

Dear Zach: Many Americans who retire after 65, leaving employer group health plans, apply for Medicare benefits and discover that they may need to prove they had “creditable coverage” for a Part D prescription drug plan.

Enrolling in Medicare Part B properly does not prove that your employer’s group prescription drug plan was creditable.

As the “Medicare &You” handbook states: “Creditable prescription drug coverage could include drug coverage from a current or former employer or union, TRICARE, Indian Health Service, the Department of Veterans Affairs, or individual health insurance coverage.”

Your plan must tell you each year if your non-Medicare drug coverage is creditable. Keep records showing when you had other creditable prescription drug coverage, and tell your plan when they ask about it. Otherwise, you may have to pay a penalty for as long as you have Medicare drug coverage.

For more details on “creditable prescription drug coverage,” visit medicare.gov.

Creditable drug coverage should “meet or exceed” Medicare’s Part D plan minimums. The minimum deductible for 2025, for example, should be $590 or less (this amount changes every year) with a maximum out of pocket. The benefit amount should be unlimited, so if your plan has a coverage limit or cap, it is not creditable.

Medicare does not regard discount prescription drug programs from Walmart, Kroger, GoodRx, Amazon pharmacy or your local pharmacy that offer low-cost generics as “creditable coverage.” According to CMS, these types of prescription drug programs are not creditable.

If you wait longer than 63 days without creditable prescription drug coverage when leaving company benefits and are older than 65 years and 90 days old, you may be assessed a late enrollment penalty of 1 percent for each month going back to when your Part A began.

Zach, you need the record from your previous employer plan showing that your drug coverage was creditable and submit it to your plan.

Toni King is an author and columnist on Medicare and health insurance issues. If you have a Medicare question, email info@tonisays.com or call 832-519-8664.