Most retirees should join a Medicare Part D plan to
avoid incurring a penalty later. But some retirees will be penalized
if they join the prescription-drug program.
Members of retiree health-care
If you already have some form of prescription-drug coverage from
an employer- or union-sponsored health-care plan, you might not
need to join a Medicare prescription-drug plan. Your current drug
plan may be determined to be "creditable coverage" --
as good and valuable as the newly available Medicare prescription
By now, your employer or union should have sent you
written notice stating specifically whether your current prescription-drug
coverage meets Medicare's criteria. If you have not yet received
this information, get in touch with your employer's benefits administrator
or contact your union's steward.
Once you have obtained written confirmation that your
plan is on par with available Medicare prescription drug plans,
keep that information in a safe-deposit box and hang on to it. If
you ever lose that employer- or union-sponsored drug coverage in
the future, you will then be able to sign up with another insurance
provider without paying any premium penalties since you can prove
you had creditable coverage.
To avoid penalties, you must provide this documentation
to your new prescription-drug insurance provider and sign up for
a new Medicare-approved plan within 63 days of losing your previous
employer- or union-sponsored coverage.
with Medigap coverage
Some Medigap plans cover prescription drugs, some
don't. If you have a plan that does not cover drugs, you can keep it unchanged
and sign up for a Medicare-approved prescription drug plan. But if your Medigap
plan covers drugs, you must choose between the two.
If you choose to keep an existing Medigap insurance
plan that covers drugs, be aware that if you change your mind and
opt to enroll in a Medicare prescription drug plan, you will probably
be required to pay a late penalty on top of all of your future premiums
because very few Medigap plans offer drug coverage that is as good
as the Medicare plan.
By this time you should have received a letter from
your Medigap insurer explaining how its insurance compares with
Medicare's. If the prescription drug coverage isn't as good as Medicare's,
it's best to join a Medicare-approved plan at the earliest opportunity.
and federal workers
Veterans receiving drug coverage from the Veterans
Administration health-care system receive coverage that is creditable and they
face no premium penalties should they later join a Medicare-approved prescription
drug plan. Military retirees and their dependents belonging to the TRICARE program
can also remain in it, for it is considered "creditable coverage."
Federal retirees with prescription-drug coverage available
through Federal Employees Health Benefits Program, or FEHBP, also
receive coverage that is considered creditable, and they will face
no penalty if they join a Medicare-approved drug plan in the future.
Generally speaking, if you are a federal retiree or
veteran, your existing drug benefit is better than that available
through Medicare Part D. However, if you are a veteran or federal
retiree with limited income and resources, or if you live far from
a VA facility, you might qualify for extra help from Medicare --
and you might find Medicare
Part D offers greater flexibility. Before making any changes,
though, first contact your benefits administrator for information
about your TRICARE, VA or FEHBP coverage.