I'm being assessed a medicare Premium pEnalty. Why, and what can I do?

November 20, 2019 6:13 PM

Hi, AskMe. :) I'm trying to sign up for a new Medicare plan in the US, which offers prescription drug coverage. I'm an otherwise healthy adult who has never needed any prescription coverage until now. I'm being told I owe a penalty on my premium. Why, and what can I reasonably do?

According to my insurance company, I may owe a lifetime penalty on my premiums because my previous Medicare plan(s) have not offered prescription drug coverage. I first became eligible for Medicare in 2013, but have never really paid attention to it until recently, because I actually need a very expensive drug, which I hope will be paid for. I don't understand the logic behind this page, nor do I know what grounds I might have for requesting a reconsideration. I'm hoping MeFi might be able to explain one or the other to me.

I'm totally blind, but otherwise healthy. I am hoping to obtain a particular drug to help with my persistent sleep issues, which would otherwise cost me thousands if I paid out of pocket. This is my first brush with prescriptions in any form, as far as I'm aware, certainly my first brush with insurance for them. I'm aware the penalty will probably not be huge, but I'd still appreciate an explanation if at all possible. Thanks, Mefi.

posted by Alensin to Health & Fitness (7 answers total)

I see you are in Washington State, so I would suggest you contact the Statewide Health Insurance Benefit Administrators https://www.insurance.wa.gov/statewide-health-insurance-benefits-advisors-shiba
Hopefully they can advise you. It’s free, so nothing lost.
posted by dbmcd at 6:21 PM on November 20, 2019 [1 favorite]

Medicare prescription drug plans, or Part D plans, are offered separately from Medicare Part A/B plans (hospital and office based care). If you choose not to get a Part D plan when you first become eligible to get one, the penalty is based on how long you went without prescription coverage. I believe the rationale is to discourage people from only signing up for prescription coverage when they need something expensive.

The primary grounds for reconsideration would be having other forms of prescription coverage during that time, for example via employer-based insurance, but I'm not sure what else would qualify you for an exception.

I'd agree with calling your state benefit administrators or, if you have access to a social worker or case worker through your PCP, they are usually very familiar with this process.
posted by The Elusive Architeuthis at 6:41 PM on November 20, 2019 [5 favorites]

If you go without “creditable” drug coverage for more than 63 days, Medicare penalizes you once you do enroll in Part D (drug coverage).

This might help:
https://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/downloads/11222-P.pdf
posted by Pax at 6:42 PM on November 20, 2019 [1 favorite]

There may be some tie to the Affordable Care Act and the mandate for monthly health insurance coverage. I would suggest calling the Internal Revenue Service to make sure this isnt the case. They have a Volunteer Individual Tax Advocate office in a city near you if you look up IRS.gov/VITA that should be able to assist you.
posted by The_imp_inimpossible at 1:28 AM on November 21, 2019

Best answer: Medicare wants you to pay for perscription drug coverage regardless of if you need prescriptions to avoid people avoiding paying premiums until they need something that costs more than the premium would for them.

So, when you sign up for prescription coverage and didn't have coverage previously you are assessed a penalty based on the number of months that you are without coverage. That cost is 1 percent per month without coverage. If you've been without coverage for seven years (Jan 2013- Jan 2020, as a basic estimate) that's 84 percent pentalty which will bring your monthly cost to 60.24 going of the numbers provided in the link you provided.

The only way this penalty could be wrong was that you actually had coverage. Did you? If so, then you need to appeal. If not, they are recouping the cost of the premiums you should have paid into the system, because insurance is funded by premiums.
posted by AlexiaSky at 3:09 AM on November 21, 2019 [7 favorites]

The late penalty was implemented when Part D started in 2006, unrelated to the ACA, so the IRS route may not pan out.
posted by Anonymous at 3:44 AM on November 21, 2019

Best answer: Also--all insurance works on the basis that the number of people whose costs are less than the premiums outweigh those whose costs are more than the premiums. This extra is what enables the company (or government in this case) to pay for the expensive stuff. If the pool of payers is only people who need expensive treatments them the insurance cannot break even and enters what's called a "death spiral". The service provider raises premiums to try to make up the difference, which causes more people to drop out, which necessitates raising premiums further, and so on. It is worth it to the payer because one day they might be the person who needs expensive healthcare, or money to pay for the house fire or car accident or whatever has gone wrong. And at that point they will be the one relying on the low-cost payers and will recoup the premiums they've been paying.

The penalty is implemented to ensure there is an adequate population of low-cost payers and make up the difference of the years someone hasn't been paying. The government is also betting that a person who signs up late is more likely to be doing so because they now require expensive meds, so they're more likely to incur costs greater than the premium they're paying.

For what it's worth--if you are under 65 and are disabled then you will only have to pay the penalty until you turn 65.
posted by Anonymous at 4:08 AM on November 21, 2019