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Medicare laws can be very confusing. Each part of Medicare has specific rules attached to it, and it is important to understand when you need to enroll and when you can choose not to.

What Is Medicare Part D?

Medicare D is the portion of Medicare which covers prescription drugs. Just as with Medicare Part B, there is a monthly premium associated with this coverage. If you are eligible for Medicare Part A or Part B, you are also eligible for Part D.

Are There Penalties?

If you are eligible for Part D and do not enroll, you could be subject to a penalty in some instances. The penalty comes in the form of a higher premium when you do enroll at a later date. The late enrollment penalty is equal to 1% of the average premium per month, which equates to 12% per year. For example, if you do not enroll for Medicare Part D when initially eligible and wait three years before signing up, your monthly premium would be increased by 36%. That represents a significant cost increase, which is why it is important to understand when you need to enroll and when you can safely delay signing up.

If you currently have coverage which is as good as or better than Medicare Part D, you do not need to enroll when eligible and are not penalized. This is called having “creditable coverage” and can be coverage through a retiree medical plan or if you are covered by your spouse’s plan. If you have this type of coverage, you should receive a “Notice of Creditable Coverage” on an annual basis. It is important to keep this notice, as this is what will prevent you from having to pay the late enrollment penalty should you need Medicare Part D at some later time. If you do not know if the coverage you currently have is creditable coverage, contact your insurance provider and ask them. If you do not have creditable coverage, and do not enroll in Medicare Part D when initially eligible, you will be penalized when you do finally enroll.