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Medicare Part D for Retirees and FEHB

MEDICARE

Medicare Part D is a voluntary prescription drug program for Medicare beneficiaries. It gives access to retail outpatient prescription drugs at reduced rates. Retirees in the Federal Employee Health Benefits Program often wonder whether they should sign up for Part D.

Eligibility

To be eligible to enroll in a Part D drug plan as a standalone plan, a beneficiary must live in the plan’s service area and be enrolled in either Medicare Parts A and/or B. Enrollees pay a monthly premium set by the plan. There are usually many options to choose from and premiums can range from as little as $10/month to $150/month.

Most enrollees will pay just the plan premium for Part D; however, some will pay more because they are in a higher income bracket. Those who filed individual tax returns earning more than $85,000, or couples filing jointly who earned more than $170,000 will pay a fee referred to as Income-Related Monthly Adjustment Amount.

FEHB vs. Medicare Part D

Medicare Part D is voluntary because not everyone needs prescription drug coverage. FEHB retirees are a great example because the Office of Personnel Management has determined that the prescription medication coverage under FEHB is as good as Medicare Part D. So, it may not be beneficial for someone to enroll in Part D because they would pay monthly premiums for a stand-alone Part D plan plus any calculated adjustments if they happen to fall in a higher income bracket.

Note—Because any FEHB coverage is considered creditable coverage, a person will have the opportunity down the road to enroll in Part D without owing a late penalty if that creditable FEHB coverage has been maintained. This will only change with lost FEHB coverage. If that happens, be sure to enroll in a Part D plan within 63 days of losing that coverage so that there are no penalties.

Advantage Plans

Some Medicare beneficiaries choose to enroll in a Medicare Advantage plan that includes Part D. Some of those plans offer $0 premiums and additional benefits like Part B premium reduction, gym membership, or ancillary coverage for dental and vision care. Benefits are subject to change from year to year on these plans, however.

OPM’s website states, “when you enroll in a Medicare Advantage plan, you may not need FEHB coverage because the Medicare Advantage plan will provide you with many of the same benefits. You should review the Medicare Advantage plan benefits carefully before making a decision to suspend or cancel FEHB coverage.”

OPM’s site also states that if someone suspends FEHB coverage for an Advantage plan, they may re-enroll in FEHB if they later lose or cancel that plan.