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 fifty years. But it will rarely benefit those, like Federal retirees, who have good prescription drug coverage from their former employer. A typical plan will cost four to five hundred dollars in premium and provide little improved benefit for most.

Therefore, few Federal retirees join a Part D plan, and few should do so, but this sometimes misses worthwhile savings. 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 cases where either early or delayed Part D enrollment makes good sense. 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 annuitant 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 annuitants in plans with relatively weak prescription drug coverage, like GEHA Elevate and Standard options. These GEHA plans require paying about half the cost of name brand drugs. But they promise to be secondary payers for any remaining costs after a Part D plan pays “primary”. In practice, this can reduce drug costs close to zero. 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 wraparound benefits to those who join Part D, unlike their improved coverage for those with Parts A or B. Most plans simply promise to “consider” paying part of your Part D costs, whatever that means. And having two drug plans involves extra 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.