What Federal Annuitants Need to Know About the FEHB Program and Medicare Part D

The Medicare Part D prescription drug program benefits millions of low-income elderly people. It fills a major hole in Medicare that lasted 50 years. But it will rarely benefit those, like Federal annuitants, who have good drug coverage from their former employer.

Few Federal annuitants should join a Part D plan. A typical plan will cost four or five hundred dollars in premium and provide little improved benefit for most. Also, there is no penalty for joining Part D at a later time if you have current "creditable" coverage. This test is met by all FEHB plans. There are three exceptions. First, a few Federal annuitants have incomes and liquid assets low enough to qualify for special help. For example, a divorced former spouse may receive so little in pension that he or she qualifies for low-income assistance (the income cutoff is approximately $18,000, depending on state of residence). In such a case, the retiree may be able to reduce drug costs to almost nothing. You apply to the Social Security Administration to obtain an official decision. Second, the Part D benefit can offer savings to retirees in plans with relatively weak prescription drug coverage, like GEHA Standard option. This GEHA plan only reimburses half the cost of name brand drugs. An enrollee with a name brand drug costing at retail $2,000 a year would be out of pocket $1,000 under GEHA. Many Part D plans would pay most of this cost for a premium of $500 a year or less, and GEHA would pay half the rest. Third, a Part D plan will let enrollees in High Deductible and Consumer-Driven plans such as Aetna Direct, NALC CDHP, or MHBP HDHP avoid using their personal account for routine drug expenses.

Unfortunately, the national plans are not offering extra benefits such as copay waivers to those who join Part D, unlike their improved coverage for those with Parts A or B. They simply promise to “consider” paying part of your Part D costs, whatever that means. And having two drug plans involves a lot of paperwork. Hence, only if you can achieve substantial savings for your particular drugs is it worthwhile to join Part D. Also, before enrolling in Part D check whether or not you are subject to income-related premiums. The law now subjects Part D enrollees to the same income-tested levels as under Part B. If your adjusted gross income is $85,000 or more for single people, or $170,000 or more for couples, you would have to pay a premium surcharge for Part D.