Healthcare Affordability Series Part 3: How Medicare Part D Can Reduce Prescription Drug Costs for Federal Annuitants
Healthcare Affordability Part 3: How Medicare Part D Can Reduce Prescription Drug Costs for Federal Annuitants
Prescription medications can make up a substantial share of your annual out-of-pocket healthcare expenses, especially if you take brand-name drugs. For federal annuitants enrolled in Medicare, adding a Part D prescription drug plan may offer meaningful savings. Many FEHB plans now include a Part D option that could cover additional drugs, provide lower out-of-pocket costs, and offer a lower catastrophic limit than an FEHB plan alone. This combination can translate into real protection and real money back throughout the year.
How Part D Works In FEHB
Beginning in plan year 2024, OPM allowed FEHB carriers to offer Medicare Part D Prescription Drug Plans (PDPs), also referred to as Employer Group Waiver Plans (EGWPs). To receive OPM approval, these plans must provide “equal to or better” coverage than what can be found from an FEHB plan’s prescription drug coverage, which means:
- Drug Coverage: The Part D formulary must cover at least the same prescription drugs as the FEHB plan, with the option to include additional medications.
- Member Costs: Your out-of-pocket costs under Part D must be no higher than what you would pay under your FEHB plan’s standard prescription coverage and may be lower in some cases.
To be eligible to enroll in Part D, you must have Medicare Part A, or both Parts A and B. Importantly, FEHB plans offering these PDP EGWP options do not charge an additional premium for the Part D plan, but they are subject to the Income Related Monthly Adjustment Amount (IRMAA). IRMAA surcharges for 2026 are based on your modified adjusted gross income from your 2024 tax return. Single filers with a modified adjusted gross income above $109,000 and joint filers above $218,000 fall into the first IRMAA tier, resulting in an additional $14.50/month surcharge per Medicare beneficiary.
Another key benefit is its annual catastrophic limit. Under Part D, your out-of-pocket spending for covered drugs is capped at $2,100 per year, or $2,000 with Aetna and MHBP plans. This level of financial protection is not available through standard FEHB prescription drug benefits, making Part D particularly valuable for annuitants with high or unpredictable medication costs.
Which FEHB Plans Offer Part D?
There are 45 FEHB plans that offer Part D in 2026:
Aetna Direct Consumer Option
Aetna Open Access: Basic, High (MD, VA, DC)
APWU High
BCBS: Basic, Standard
Compass Rose High
Foreign Service Benefit Plan
GEHA: High, Standard
HealthPartners: High, Standard
Kaiser: All plans in all markets
MHBP: Consumer Option, Standard, Value
SAMBA: High, Standard
Part D Savings Examples
Whether you’ll save with Part D depends on your prescriptions and your FEHB plan. For example, your savings may be higher if you take brand-name drugs over generic medications.
I picked out a couple of examples to show you the range, looking at prices from a CVS pharmacy in the Washington D.C. area with FEHB coverage from BCBS Standard compared to prices from the BCBS FEP PDP.
Trulicity 0.75/0.5 inj, 28-day supply: $85.51 from BCBS Standard, $20.00 from Part D, a savings of $65.51.
Xarelto 2.5mg tablet, 30-day supply: $286.24 from BCBS Standard, $35.00 from Part D, a savings of $251.24.
Wegovy .25 inj, 28-day supply: $640.30 from BCBS Standard, $35.00 from Part D, a savings of $605.30.
Visit your carrier’s website and use their prescription drug pricing tools to see both FEHB and Part D pricing. BCBS makes this easy by allowing you to compare both within the same tool, while other carriers provide separate pricing tools, meaning you'll need to navigate between both to compare costs.
How To Enroll or Disenroll
If you haven’t already opted out of your FEHB plan’s Part D coverage, OPM allows carriers to automatically enroll Medicare-eligible members during Open Season each fall. You’ll receive a notice explaining the upcoming enrollment that provides instructions on how to opt out if you prefer not to participate.
Most FEHB carriers allow you to enroll or disenroll throughout the year, but BCBS is an exception and limits these changes to once per benefit year. Enrollment and disenrollment forms are available on each carrier’s website and must be submitted directly to the carrier for processing.
Note: Part D works differently for USPS annuitants in the PSHB program than it does for FEHB annuitants. You can learn more about those differences here.
Reasons to Not Have Part D
While Part D will save most federal annuitants money on their prescription drugs, it isn’t the best choice for everyone. Here are three scenarios where you shouldn’t enroll:
- Part D IRMAA: If your income places you into IRMAA, evaluate whether Part D’s benefits are worth more than the surcharge. Part D IRMAA is much lower than Part B IRMAA at $14.50/month in the first income tier compared to $81.20/month. Also keep in mind that the catastrophic limit with Part D is much lower than the medical catastrophic limit found in FEHB plans.
- International coverage: Medicare does not provide prescription drug coverage overseas. For annuitants living abroad, continue with the prescription drug benefits from your FEHB plan. Annuitants travelling overseas should consider purchasing travel insurance to protect against medical expenses not covered by their health insurance.
- Discount coupons: Individuals enrolled in Part D are disqualified from using discount coupons offered by pharmaceutical manufacturers. If you currently use these discounts and they offer a lower price than the FEHB or Part D plans available to you, don’t enroll in Part D.
In Summary
If your FEHB plan offers a Part D option and you haven’t evaluated whether it could reduce your prescription costs, now is a great time to compare. You can enroll in Part D at any point during the year, no qualifying life event required, so you can make the switch whenever it makes sense and begin benefitting from savings right away.
Keep in mind that some individuals, particularly those subject to Part D IRMAA, may not see immediate savings, but you can always revisit your decision in future years without penalty. All FEHB plans provide creditable prescription drug coverage, which means you can enroll in Part D later without facing any penalties.
