Everything You Need to Know About Medicare Part D - Prescription Drugs

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 federal retirees who have good prescription drug coverage from their former employer. A typical plan costs $400-$500 in premium per year and provides little in the way of improved benefits for most. 

Few federal retirees should join a Part D plan, but there are a few scenarios where it would make financial sense. 

• 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 the 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. 
• The Part D benefit can offer savings to annuitants in plans with relatively weak prescription drug coverage, like the GEHA Standard plan. This GEHA plan only reimburses 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 $0.  
• A Part D plan will let enrollees in high-deductible plans such as Aetna Direct, NALC CDHP, or MHBP HDHP avoid using their HRA for routine drug expenses, improving the chances there will be some plan contribution that can be rolled over into the following year. 
• If you're on an expensive brand-name drug that is not routinely covered by any FEHB plan, you can always look to see if that drug is on formulary with a Part D plan. The savings you'll enjoy from an on-formulary drug will more than make up for the cost of the extra premium.

Federal retirees can decide to join Part D at any time as there is no penalty for joining Part D late. This is because federal retirees have creditable prescription drug coverage through their existing FEHB plan which negates late enrollment penalties. 

One last thing to keep in mind is that Part D coverage is subject to premium adjustments for higher income retirees. If you fall into one of those categories, Part D plans make even less financial sense.