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What is considered "creditable" drug coverage for purposes of the Medicare Part D late-enrollment penalty?


In general, "creditable" prescription drug coverage is considered by Medicare to be "as generous as, or more generous than" (or at least as good as) standard Medicare Part D prescription drug coverage or is expected to pay on average as much as the standard Medicare prescription drug coverage.

If your drug plan is considered creditable - or at least as good as basic Medicare Part D coverage, then you will not be subject to a late-enrollment penalty if you ever decide to leave your present drug coverage and join a Medicare Part D plan (PDP) or Medicare Advantage plan that includes drug coverage (MAPD).

Question:  Is VA drug coverage creditable?

Yes.  Drug coverage provide by the VA or TRICARE is considered creditable coverage and - more importantly you can actually use your VA coverage with a Medicare Part D plan - possibly providing the most affordable drug coverage.  You can read more here:  https://Q1FAQ.com/272.html

QuestionIs my employer health plan drug coverage creditable?

Maybe.  You will need to speak with your employer health plan administrator to confirm that your employer drug coverage is creditable.  In fact, you probably received a letter from your employer plan telling you whether your drug coverage was creditable, but many people discard the letter without understanding the significance of creditable coverage.  For more information, please see our Frequently Asked Question, "What is the difference between creditable and non-creditable Employer Retiree Drug Coverage? "
The federal Medicare regulations addressing creditable drug coverage state that:

"[u]nder [42 C.F.R.] §423.56(a) of the final regulation, [prescription drug] coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of standard prescription drug coverage under Medicare Part D, as demonstrated through the use of generally accepted actuarial principles and in accordance with CMS actuarial guidelines. In general, the actuarial equivalence test measures whether the expected amount of paid claims under the entity's prescription drug coverage is at least as much as the expected amount of paid claims under the standard Part D benefit."

Additional guidance from the Center for Medicare and Medicaid Services (CMS) is provided in the "Creditable Coverage Simplified Determination" document that holds:

"If an entity is not an employer or union that is applying for the retiree drug subsidy, it can use the simplified determination of creditable coverage status annually to determine whether its prescription drug plan’s coverage is creditable or not.  The plan will be determined to be creditable if the plan prescription drug plan design meets all four of the following standards.

However, the standards listed under 4(a) and 4(b) may not be used if the entity’s plan has prescription drug benefits that are in with benefits other than prescription drug coverage (i.e. Medical, Dental, etc.).  Integrated plans must satisfy the standard in 4(c).

A prescription drug plan is deemed to be "creditable" if it:
1) Provides coverage for brand and generic prescriptions;
2) Provides reasonable access to retail providers;
3) The plan is designed to pay on average at least 60% of participants’ prescription drug expenses; and
4) Satisfies at least one of the following:
  a) The prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000, or
  b) The prescription drug coverage has an a expectation that the amount payable by the plan will be at least $2,000 annually per Medicare eligible individual.
  c) For entities that have integrated health coverage, the integrated health plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000 and has no less than a $1,000,000 lifetime combined benefit maximum.
[Integrated Plan - An integrated plan is any plan of benefits that is offered to a Medicare eligible in where the prescription drug benefit is combined with other coverage offered by the entity (i.e., medic dental, vision, etc.) and the plan has all of the following plan provisions:

1) a combined plan year deductible for all benefits under the plan,
2) a combined annual benefit maximum for all benefits under the plan, and
3) a combined lifetime benefit maximum for all benefits under the plan.

A prescription drug plan that meets the above parameters is considered an integrated plan for the purpose of using the simplified method and would have to meet steps 1, 2, 3 and 4(c) of the simplified method If it does not meet all of the criteria, then it is not considered to be an integrated plan and would have to meet steps 1, 2, 3 and either 4(a) or 4(b).]

NOTE: If the entity cannot use the Simplified Determination method stated above to determine the creditable coverage status of the prescription drug plan offered to Medicare eligible individuals, then the entity must make an actuarial determination annually of whether the expected amount of paid claim under the entity’s prescription drug coverage is at least as much as the expected amount of paid claims under the standard Medicare prescription drug benefit." (Updated September 18, 2009))

(https://www.cms.gov/ Medicare/ Prescription-Drug-Coverage/ CreditableCoverage/ Downloads/ CCSimplified091809.pdf)

see also:
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/index.html





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Tips & Disclaimers
  • The Medicare Advantage and Medicare Part D prescription drug plan data on our site comes directly from Medicare and is subject to change.
  • Medicare has neither reviewed nor endorsed the information on our site.
  • We provide our Q1Medicare.com site for educational purposes and strive to present unbiased and accurate information. However, Q1Medicare is not intended as a substitute for your lawyer, doctor, healthcare provider, financial advisor, or pharmacist. For more information on your Medicare coverage, please be sure to seek legal, medical, pharmaceutical, or financial advice from a licensed professional or telephone Medicare at 1-800-633-4227.
  • We are an independent education, research, and technology company. We are not affiliated with any Medicare plan, plan carrier, healthcare provider, or insurance company. We are not compensated for Medicare plan enrollments. We do not sell leads or share your personal information.
  • Benefits, formulary, pharmacy network, provider network, premium and/or co-payments/co-insurance may change on January 1 of each year. Our PDP-Compare.com and MA-Compare.com provide highlights of annual plan benefit changes.
  • The benefit information provided is a brief summary, not a complete description of benefits. For more information contact the plan.
  • Limitations, copayments, and restrictions may apply.
  • We make every effort to show all available Medicare Part D or Medicare Advantage plans in your service area. However, since our data is provided by Medicare, it is possible that this may not be a complete listing of plans available in your service area. For a complete listing please contact 1-800-MEDICARE (TTY users should call 1-877-486-2048), 24 hours a day/7 days a week or consult www.medicare.gov.
  • When enrolling in a Medicare Advantage plan, you must continue to pay your Medicare Part B premium.
  • Medicare beneficiaries with higher incomes may be required to pay both a Medicare Part B and Medicare Part D Income Related Monthly Adjustment Amount (IRMAA). Read more on IRMAA.
  • Medicare Advantage plans that include prescription drug coverage (MAPDs) are considered Medicare Part D plans and members with higher incomes may be subject to the Medicare Part D Income Related Monthly Adjustment Amount (IRMAA), just as members in stand-alone Part D plans. In certain situations, you can appeal IRMAA.
  • You must be enrolled in both Medicare Part A and Part B to enroll in a Medicare Advantage plan. Members may enroll in a Medicare Advantage plan only during specific times of the year. Contact the Medicare plan for more information.
  • If you are enrolled in a Medicare plan with Part D prescription drug coverage, you may be eligible for financial Extra Help to assist with the payment of your prescription drug premiums and drug purchases. To see if you qualify for Extra Help, call: 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048, 24 hours a day/ 7 days a week or consult www.medicare.gov; the Social Security Office at 1-800-772-1213 between 7 a.m. and 7 p.m., Monday through Friday. TTY users should call, 1-800-325-0778; or your state Medicaid Office.
  • Medicare evaluates plans based on a 5-Star rating system. Star Ratings are calculated each year and may change from one year to the next.
  • A Medicare Advantage Private Fee-for-Service plan (PFFS) is not a Medicare supplement plan. Providers who do not contract with the plan are not required to see you except in an emergency.
  • Disclaimer for Institutional Special Needs Plan (SNP): This plan is available to anyone with Medicare who meets the Skilled Nursing Facility (SNF) level of care and resides in a nursing home.
  • Disclaimer for Dual Eligible (Medicare/Medicaid) Special Needs Plan (SNP): This plan is available to anyone who has both Medical Assistance from the State and Medicare. Premiums, co-pays, co-insurance, and deductibles may vary based on the level of Extra Help you receive. Please contact the plan for further details.
  • Disclaimer for Chronic Condition Special Needs Plan (SNP): This plan is available to anyone with Medicare who has been diagnosed with the plan specific Chronic Condition.
  • Medicare MSA Plans combine a high deductible Medicare Advantage Plan and a trust or custodial savings account (as defined and/or approved by the IRS). The plan deposits money from Medicare into the account. You can use this money to pay for your health care costs, but only Medicare-covered expenses count toward your deductible. The amount deposited is usually less than your deductible amount, so you generally have to pay out-of-pocket before your coverage begins.
  • Medicare MSA Plans do not cover prescription drugs. If you join a Medicare MSA Plan, you can also join any separate (stand-alone) Medicare Part D prescription drug plan
  • There are additional restrictions to join an MSA plan, and enrollment is generally for a full calendar year unless you meet certain exceptions. Those who disenroll during the calendar year will owe a portion of the account deposit back to the plan. Contact the plan provider for additional information.
  • Medicare beneficiaries may enroll through the CMS Medicare Online Enrollment Center located at www.medicare.gov.
  • Medicare beneficiaries can file a complaint with the Centers for Medicare & Medicaid Services by calling 1-800-MEDICARE 24 hours a day/7 days or using the medicare.gov site. Beneficiaries can appoint a representative by submitting CMS Form-1696.