Creditable Coverage and Late Enrollment Penalty

This section provides a general overview of the Part D Late Enrollment Penalty (LEP) and Creditable Coverage Period Determinations under the Medicare Prescription Drug Benefit Program.  It also provides appropriate links to CMS guidance relative to this subject. 

Overview

Medicare beneficiaries may incur a late enrollment penalty (LEP) if there is a continuous period of 63 days or more at any time after the end of the individual's Part D initial enrollment period during which the individual was eligible to enroll, but was not enrolled in a Medicare Part D plan and was not covered under any creditable prescription drug coverage.

“Creditable prescription drug coverage” is coverage that meets Medicare's minimum standards since it is expected to pay, on average, at least as much as Medicare's standard prescription drug coverage.  Creditable prescription drug coverage includes, but is not limited to: some employer-based prescription drug coverage, including the Federal Employees Health Benefits Program; qualified State Pharmaceutical Assistance Programs (SPAPs); military-related coverage (e.g., VA, TRICARE); and certain Medicare supplemental (Medigap) policies.   As outlined at 42 CFR 423.56(c) and (d), with the exception of Prescription Drug Plan (PDP) Sponsors, Medicare Advantage (MA) Organizations, §1876 Cost-Based Contractors, and PACE organizations offering prescription drug plans, entities that offer prescription drug coverage must make an annual determination of creditable coverage status and provide a disclosure notice to Medicare eligible individuals.  

With limited exceptions (for example, beneficiaries who are receiving “extra help” from Medicare), the Part D LEP remains with the beneficiary for as long as he/she has Medicare prescription drug coverage.

 2010 LATE ENROLLMENT PENALTY GUIDANCE

The CMS has released an update to the existing Creditable Coverage Period Determinations and Late Enrollment Penalty guidance (Chapter 4 within the Medicare Prescription Drug Benefit Manual).  This chapter has undergone formatting changes and has been revised to clarify our policies in a number of areas, as well as to incorporate information previously released in HPMS Memos pertaining to CC/LEP. Therefore, the CMS has provided a document summarizing the changes (see below link). 

This revised Chapter 4 supersedes all previously released HPMS Memos pertaining to CC/LEP:  “Updated Guidance on Creditable Coverage Period Determinations and the Late Enrollment Penalty” (April 11, 2008); “Reporting Creditable Coverage Information for Former Plan Members” (November 26, 2008); and “Updated Attestation Forms for Reporting Creditable Coverage” (January 14, 2009).

This updated Chapter 4 is effective with enrollment applications received on or after April 1, 2010.