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Some seniors don't need Medicare Part D

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 plans
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 plans.

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.

Those 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.

Veterans 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.

Bankrate.com's corrections policy
-- Posted: Nov. 15, 2005
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