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Many want to keep their current prescription drug coverage rather than choose a Medicare Part D plan. They may be able to if their current plan offers Medicare creditable coverage.
What is creditable coverage for Medicare?
Creditable coverage for Medicare is when you can get medical or prescription drug coverage from something other than Medicare that is at least as good, if not better than Medicare coverage. The Medical Modernization Act (MMA) requires those entities to tell you whether their prescription drug coverage is creditable. You should receive a written Medicare Part D notice of creditable coverage or disclosure before October 15, so you have time to decide if you will need to enroll in Part D.
Your plan must meet some basic requirements to be considered creditable coverage for Medicare:
- Pays at least 60% of participants’ drug costs;
- Allows access to retail providers;
- Covers both brand name and generic prescription options;
- Meets certain limits for minimum annual coverage amounts.
Is COBRA considered creditable coverage for Medicare?
Most of the time, COBRA is not considered creditable coverage for Medicare Part D. However, some plans are exceptions. Some people can enroll in Part D during a Special Enrollment Period without paying the penalty. However, typically COBRA plans are very costly. Most people enroll in Medicare instead of maintaining their COBRA plan.
Is VA drug coverage creditable for Medicare?
If you are eligible to enroll in VA drug coverage, then that coverage is creditable for Medicare Part D. You can have VA drug coverage at the same time as Medicare without it affecting your VA benefits. The VA usually encourages people to enroll in Medicare when they become eligible to avoid paying a permanent penalty, even if they have VA benefits.
Private insurance and Medicare creditable coverage
Many continue working past 65 and want to keep their employer group or trade union insurance coverage. These private insurers must send out an annual Medicare Part D creditable coverage notice. If your coverage through your employer or trade union ends, then you will have a two-month Special Enrollment Period in which you can enroll in Medicare Part D. But if you go more than 63 days without enrolling, then you will receive a late enrollment fee that permanently increases your Part D premium. The late enrollment fee is 1% of the “national base beneficiary premium.” That fee in 2023 was $32.74, and it is $34.70 in 2024.
Know your Medicare Part D options
Read your Medicare Part D notice of creditable coverage carefully. If you don’t have creditable coverage and don’t enroll in Part D, you could pay a permanent late enrollment fee each month for the rest of your life — a significant hit to your healthcare budget. However, if you currently have Medicare creditable coverage, you can stay with your current insurance provider until the situation changes.
Article updated on October 31, 2023
