Part D Late Enrollment Penalty (LEP)

Last week I met with a gentleman who enrolled in Medicare a few years ago when he turned 65.  At the time he was healthy and took only one generic prescription that he was getting for $4.00 at Walmart so he did not see the need to spend $20 per month on a Part D Prescription Drug Plan that would only reduce the cost of the drug to $2.

Recently he had been prescribed a more expensive brand name drug so he called me to help him compare the costs on the different Part D plans in his area.  We found a plan that was perfect for his situation and he was very happy until I explained to him that he would have to pay a Late Enrollment Penalty (LEP) on top of his regular premium.  He did not understand why he should have to pay almost $10 per month extra because he did not have insurance.  Unfortunately this is how it works and the worst part is that he will pay this additional $10 for the rest of his life.

How can you avoid this penalty?

If he had just contacted me when he first turned 65 instead of doing it all alone I would have told him about the penalty and also could have helped him avoid the penalty altogether by telling him about a Medicare Advantage plan in his area that has a $0 monthly premium.   He would have had drug coverage with this plan.  He would have avoided the penalty AND his co-pay for his one generic prescription would have been $0!  By taking the time to meet with me he could have saved $48 per year AND avoided the penalty!

The Part D late enrollment penalty is important to understand if you are thinking of going without a drug plan.  Your penalty is calculated by adding 1% of the national base beneficiary premium ($34.10 in 2016) for every month you do not have a Part D insurance plan or certain other types of drug coverage while eligible for Part D.  This amount is added to your monthly Part D premium for life.  To avoid this penalty you must enroll in a plan that is at least as good as Medicare Part D coverage (this is known as “creditable” coverage).

NOTE:  COBRA does not offer “creditable” coverage so be careful if you are on a COBRA plan and turning 65.

Can you appeal the penalty?

Absolutely!  You always have the right to appeal any decisions like this that involve Medicare costs, but in this case your appeal is unlikely to be successful if your reason for not enrolling is that you “did not know that you were supposed to have prescription drug coverage.”

Your appeal is more likely to be successful if you believe there was a mistake, such as:

  • If you were covered by creditable drug coverage while eligible for Medicare. (Such as a group health plan through your employer)
  • Or if you received inadequate information or were not informed about whether your drug coverage was creditable.

To appeal the LEP you will need to complete the appeal form you receive from your Part D Prescription drug plan after you enroll in a plan.  Then attach any evidence you have. Evidence can be a letter from your employer or former employer stating that you had creditable coverage during the time that you were eligible for Medicare but not enrolled in a Part D plan. Then mail everything to the address on the appeal form. This address should be for MAXIMUS Federal Services, which is the company contracted by Medicare to handle these appeals.

The appeal deadline is 60 days from the date you received the letter informing you of the penalty. You can expect a decision from MAXIMUS within about 90 days. If your appeal is successful, your plan has to pay you back for the LEP payments you made while your appeal was pending.

Don’t be afraid to ask for help!

Working with someone like myself who has the knowledge and experience with these Medicare plans can help ensure you do not miss any of these important details and can also simplify the entire process of comparing Medicare supplement plans.

The best part about working with me is that it will not cost you anything to talk with me to discuss your options and review the plans that are available. I am paid by the insurance companies in the form of a commission when you enroll in a plan. You will not pay anything to meet with me and you will pay the same price for your insurance that everyone pays whether they had my help or not.

“My goal is to help people and I have found great joy in being able to offer my services to people who need my help.”

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Are you turning 65 and still working?  Read this.