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Part 4: Do You Need Medicare Part D?

Considering all your options

En español l Don’t dismiss Medicare drug benefits out of hand — even if right now you have good coverage or don’t take any prescription drugs. First consider all the angles, because there may be important consequences if you don’t.

Do I need Medicare drug coverage — when I don’t use any prescription drugs right now?

If you use few or no drugs now, you may wonder if it’s worth signing up for Part D, because you’d be paying a premium to your plan but getting nothing back. But Medicare drug coverage is not just a government benefit. It’s mainly insurance, which — like all other kinds of insurance — protects you against high drug costs if and when you need it in the future. In these circumstances, consider enrolling in the Part D plan in your area that has the lowest premium, which would give you coverage at the least cost.

Can I wait and sign up later when I need coverage?

Yes, but consider this carefully. If you delay signing up for Part D when you have no other drug coverage (for example, from retiree benefits), you should be aware of the consequences:

  • You will be able to sign up only during open enrollment (Oct. 15 to Dec. 7), and not at the time you feel you need drug coverage; and
  • You will receive permanent financial penalties if you have gone for more than 63 days without other drug coverage that is considered as good as Part D.

What is the late enrollment penalty?

At least an extra 1 percent of the national average premium will be added to your premium for each month that you delay and are without creditable drug coverage, and you will pay the penalty (which usually increases each year along with the average premium) for as long as you have Medicare drug coverage. In other words, if you delay for 20 months, your Part D premiums will always be at least 20 percent more than other people pay — or you would have paid if you’d signed up on time.

For 2016 the national average premium is $34.10. So each month you go without coverage adds 34 cents (1 percent of $34) to your monthly premium. For example, if you signed up for Part D during open enrollment in November or December 2015 (so that coverage began on January 1, 2016), and you had been without creditable drug coverage for 20 months after first becoming eligible to join Part D, your penalty in 2016 would be $6.80 a month or $81.60 over the year on top of your regular plan premiums. If the national average premium increases or reduced in 2017 and subsequent years, your penalty gets higher or lower also.

How can I avoid a late penalty?


Avoiding a late penalty depends on what is the “right” time for you to sign up for Part D. Depending on your circumstances it could be:

  • When you turn 65 (and have no other drug coverage that is as good as Medicare), you need to join a Part D drug plan during the 7-month initial enrollment period when you can sign up for Medicare Part A and Part B. This period runs from three months before the month of your 65th birthday to three months after it. For example, if you turn 65 on July 16, you should join a drug plan before the end of October at the latest (with coverage starting Nov. 1) to avoid a penalty. Part D coverage begins on the first day of the month after you join a plan.

  • When you become eligible for Medicare through disability (and have no other drug insurance as good as Medicare), you get a similar seven month period to sign up for Part D as well as Parts A and B. This period runs from three months before the 25th month in which you have received Social Security disability payments and ends three months after it.

  • When you lose drug coverage (for example, from a current or former employer or union) that is at least as good as Medicare, you would not pay a late penalty if you then enroll in a Medicare drug plan and begin receiving Part D coverage within 63 days of losing your original coverage.

  • When you lose drug coverage under COBRA, you would not pay a late penalty if you enroll in a Medicare drug plan and begin receiving Part D coverage within 63 days of your COBRA drug benefits ending, provided that these benefits (an extension of employer benefits after retirement or losing a job) are considered at least as good as Part D.
  • When you return to the United States after living abroad. You cannot receive Medicare drug coverage when you’re living abroad, but you can join Part D when you return to live in this country permanently. If you turned 65 when you were living abroad, you get a seven month initial enrollment period to join a Part D plan without penalty, starting three months before the month of your return and ending three months after it. Or, if you turned 65 before leaving the United States to live abroad, you get a special Part D enrollment period on your return, and will not pay a late penalty provided that you begin receiving Medicare drug coverage within 63 days of the date of your return.

  • When you’re released from prison. You cannot receive Medicare drug coverage while in prison or in any other correctional facility, but you can join Part D when you come out. If you turned 65 while inside, you get a seven-month enrollment period to join a Part D plan without penalty, starting three months before the month of your release and ending three months after it. Or, if you turned 65 before going to prison, you get a special enrollment period after coming out, and will not pay a late penalty provided that you begin receiving Medicare drug coverage within 63 days of your release.

  •  If you receive Extra Help, you won’t face a late penalty.

What if I already have drug coverage from my job or retiree benefits? What will happen when I become eligible for Medicare?

Your current or former employer or union must tell you if your present drug coverage will change when you become eligible for Medicare. This also applies to your spouse if he or she is covered under your employer health plan and becomes eligible for Medicare. Among their options, employers can:

  • Continue your current coverage. If so, check to see if it is as good as Medicare's.

  • Offer coverage through a specified Medicare drug plan. You must enroll in this to keep your employer’s coverage.

  • Offer drug coverage that adds to Medicare by paying some or all of your out-of-pocket Part D expenses.

  • Drop coverage — maybe helping toward the cost of your Medicare drug premiums or giving no help at all.

How do I tell if my current coverage is better or worse than Medicare's?

Your employer, union or any other third party that helps pay for your drugs should inform you before your 65th birthday whether your coverage is “creditable” — that is, considered at least as good as the standard Medicare drug benefit. If you don’t receive this information, call and ask for it in writing.

If your coverage is creditable, you need do no more. Even so, if your income is limited enough to qualify for Extra Help, compare those benefits with what you have now.

If your coverage is not creditable, you can still keep it. But if you sign up for a Medicare drug plan at some future date, and you have gone for more than 63 days without creditable coverage, you would then pay a late penalty.

Are there any risks involved in enrolling in Part D when I already have drug coverage?

Yes. Most employer or union prescription drug coverage comes as part of a health benefits package. If you join a Medicare drug plan and drop your current drug coverage, you might also lose coverage for your medical services and you may not be able to get those benefits back. If you have dependents on your policy, their coverage may be affected also. Contact your employer or union benefits administrator to make sure of the consequences before you make any decisions.

What if I lose my current drug coverage or decide to drop it?

If your drug coverage is creditable and in the future you lose it through no fault of your own — for example, if your employer’s plan terminates or no longer meets Medicare’s creditability rules — you’d get a special enrollment period (SEP) to sign up for Part D without incurring a late penalty. But if you choose to drop your creditable coverage — for example, if it becomes too expensive to maintain — you won’t be entitled to an SEP, but must sign up during the open enrollment period that runs from Oct. 15 to Dec. 7 each year and begin Part D coverage on Jan. 1. If you go for more than 63 days without creditable coverage, you’d face a late penalty on joining Part D.

I’m a federal retiree. Do I need Medicare drug coverage?

No. If you’re enrolled in the Federal Employees Health Benefits Program (FEHBP) — as a current employee or retiree — your drug coverage is better than Medicare and you don’t need to sign up for Part D. But if there’s any advantage in having both types of coverage (for example, if your income is limited and you qualify for Part D’s low-cost Extra Help program), you can do so without risking your (or your dependents’) FEHBP benefits. (For more information, go to the website for the U.S. Office of Personnel Management, or call 1-888-767-6738 toll free.)

I’m a military retiree enrolled in the TriCare-for-Life program. Do I need Medicare drug coverage?


No. Drug coverage under the TFL program for military retirees and their dependents is much more generous than Medicare. But if your income is low enough to qualify for Extra Help, it’s worth comparing those benefits with what you have now. If there’s any advantage in enrolling in a Medicare drug plan, you can do so without risk of losing your (or your dependents’) TFL medical or drug coverage. If you should happen to lose TFL drug coverage in the future and switch to a Part D plan, you will not pay a late penalty as long as your Medicare drug coverage begins within 63 days of your current coverage ending. For more information on how TFL benefits fit in with Part D, call 1-800-538-9552 or go to the Tricare website.

I get my drugs from the VA. Can I sign up for a Medicare drug plan too?


Yes, if it would be an advantage. Veterans enrolled in the Department of Veterans Affairs health care program are allowed to be in the VA pharmacy program and a Medicare drug plan at the same time, without risk of losing VA medical or drug coverage. The same applies if you’re enrolled in CHAMPVA, the VA program for the dependents of some veterans killed or disabled in the line of duty. You can use either your VA benefit or your Part D plan coverage on a prescription-by-prescription basis, but you can’t use both for the same prescription. For example, you can use Part D benefits for drugs the VA doesn’t cover, and vice versa. If you don’t sign up for Part D immediately but you lose VA drug coverage in the future and wish to enroll in a Part D drug plan at that point, you will not pay a late penalty as long as your Medicare drug coverage begins within 63 days of losing VA coverage.

For more information on how VA benefits fit in with Part D, call 877-222-8387 toll free or go to the VA website. For CHAMPVA information, go to the website for the VA Health Administration Center or call 800-733-8387.

I get my drugs from the Native American health service. Do I need Part D?

Drug coverage under the Indian Health Service, the Urban Indian Health program or a Tribal Health Organization is at least as good as Medicare, so you don’t need to join Part D. Even if you currently get free or low-cost drugs under one of these programs, you’re not required to join Part D. But if you do so, especially if you qualify for Part D’s Extra Help program, you would help your community by stretching the federal dollars that support your local clinic. If you’ll soon be turning 65, contact your clinic or the benefits administrator of your health program to discuss the implications of joining Part D.

What if I have medigap insurance?

If your medigap policy (also known as Medicare supplement insurance) does not help pay for drugs, it won’t be affected by Medicare drug coverage. Medigap policies that include drug coverage are no longer sold but if you still have one of these older ones (which are labeled H, I or J) these are your options:

  • You can keep your policy’s drug coverage if you choose, but you cannot also have Medicare drug coverage at the same time. Most medigap policies are not “creditable” — meaning they do not offer drug coverage as good as Medicare — so you’d pay a late penalty if you decide to join Part D in the future.

  • You can keep your policy but drop its drug coverage (or switch to a different medigap policy that does not cover drugs) and instead get your drugs through a Medicare Part D plan. Your medigap premium would then be reduced.

Note: You cannot use medigap insurance to pay out-of-pocket costs in Medicare drug coverage. Also, bear in mind that the law prohibited any new medigap policies covering drugs to be sold since Jan. 1, 2006. As fewer and fewer people will be enrolled in them over time, premiums are likely to increase.

I get my drugs from my state Medicaid program. What happens when I turn 65?


As soon as you become eligible for Medicare, you must get your drugs from Medicare’s Part D program, not from Medicaid. You automatically qualify for Part D’s low-cost Extra Help program. (See Extra Help for People with Limited Incomes.) Medicare will enroll you in a Part D drug plan — which may not meet your needs — unless you choose one for yourself. Under Extra Help, you have the right to switch to another plan at any time. For information and help, contact your state health insurance assistance program (SHIP).

I get my drugs from a state pharmacy assistance program. Will this change when I get to Medicare age?


If your state pharmacy assistance program (SPAP) is regarded by Medicare as “qualified” — meaning they meet Medicare’s requirements — you can stay in the program and continue to get drug benefits that are better than Medicare drug coverage. But your SPAP will require you to join Part D and probably also to apply for Extra Help. If your SPAP is not “qualified” in this way, it does not count as insurance and you’d need to join Part D as soon as you’re eligible for Medicare to avoid a late penalty. Call your SPAP for more information.

What if I have individual insurance that I buy myself?

You can keep this type of insurance (non-medigap, non-group) that covers drugs and be in a Medicare drug plan, too, if you want to. Your insurer must notify you whether your current coverage is “creditable” or not. If it’s not creditable meaning that it is not considered as of equal value to Part D benefits — and you don’t join a Medicare drug plan when you’re first eligible, you’ll incur a late penalty if you join a plan in the future.

If you do join a Part D plan, you could use your individual insurance to supplement Medicare coverage, if the terms of your policy allow this. But any payments made by your insurer for drugs in the coverage gap would not count toward your out-of-pocket limit that triggers catastrophic coverage.

What if I now get my drugs from abroad?

Buying drugs from Canada or other countries generally cost less than drugs purchased in the United States. But consider:

  • As Medicare pays a share of the costs, you may find your drugs cost less under Part D than bought from abroad — especially as you now get discounts of more than 50 percent off brand-name drugs in the coverage gap, due to a provision of the 2010 Affordable Care Act, and by 2020 you will pay no more than 25 percent of the cost of any drugs in the gap. So it's worth doing a careful comparison to find out whether you'd save money by shopping abroad.

  • If your income is limited and you qualify for Extra Help, you would save far more than by buying from abroad.

  •  If your drug costs become very high, Medicare’s low-cost catastrophic coverage would give greater protection than low foreign prices.

  • Drugs from abroad do not count as “creditable” coverage. So if your foreign supplies dry up, and you join a Medicare drug plan later than when you first could, you’d pay a penalty.

  • Medicare drug plans will not cover drugs purchased from abroad. Such drugs may reduce your costs in the coverage gap — but be aware that what you pay for those drugs will not count toward your out-of-pocket limit that gets you out of the gap and into catastrophic coverage.

What if I get free drugs from a drug manufacturer’s patient assistance program?

You can still do so and have Medicare drug coverage too — as long as the manufacturer’s program continues this help for people on Medicare. Not all do, so you need to check with the company. Or check with the Partnership for Prescription Assistance website. Prescription drugs obtained in this way are useful for coping with the cost of drugs in the coverage gap if you don’t qualify for Extra Help. But be aware that the value of these drugs does not count toward the out-of-pocket limit that gets you out of the doughnut hole

Patricia Barry writes the AARP Ask Ms. Medicare column and is the author of  Medicare for Dummies, 2nd edition (Wiley/AARP, September 2015).

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