Mixed reactions to Medicare Part D in the FEHB

Medicare Prescription Drug Program or Part D was enacted as part of the Medicare Modernization Act of 2003 and went into effect on Jan. 1, 2006. Since that time, all Federal Employees Health Benefit plan brochures have included the following information in the front cover: 

The Office of Personnel Management (OPM) has determined that the “Name of FEHB” Plan’s prescription drug coverage is, on average, expected to pay out as much as the standard Medicare prescription drug coverage will pay for all plan participants and is considered Creditable Coverage. This means you do not need to enroll in Medicare Part D and pay extra for prescription drug coverage. If you decide to enroll in Medicare Part D later, you will not have to pay a penalty for late enrollment as long as you keep your FEHB coverage. 

However, if you choose to enroll in Medicare Part D, you can keep your FEHB coverage and your FEHB plan will coordinate benefits with Medicare. 

This language means that federal retirees who are 65 or older have generally enrolled in Medicare Part A (hospital insurance) and Part B (outpatient coverage) but not Part D (Medicare Prescription Drug coverage). 

Historically, Medicare Parts A & B, otherwise known as “original Medicare,” is combined with a federal health plan that waives cost-sharing (i.e. deductible, copays and coinsurance) for inpatient and outpatient care, leaving the retiree and their spouse with little out-of-pocket medical expenses other than prescription copays along with dental and vision expenses. Some plans also provide a further incentive to enroll in Medicare A & B by offering a partial rebate for the Part B premium.   

That was, until last year’s FEHB Open Season, when many federal retirees were automatically enrolled in a Part D plan, overriding their plan’s prescription drug benefit.  

This was a result of the annual “Carrier Letter" that OPM sends to the FEHB plans each year to prepare for the open season. FEHB carriers include 68 participating health insurance carriers offering 158 plan choices in 2024. OPM announced in Carrier Letter 2023-02 that it will entertain proposals that allow FEHB Program members to benefit from Medicare Part D coverage by enrolling in CMS-approved Medicare Advantage Prescription Drug Plan Employer Group Waiver Plans (MA-PD EGWPs) or Prescription Drug Plan Employer Group Waiver Plan (PDP EGWPs) for other FEHB plans. OPM stated that coordination may make healthcare more affordable for FEHB enrollees by incorporating the manufacturer discounts required under Medicare Part D.  

Under the new Postal Service Health Benefit program, all PSHB Carriers will be required to provide prescription drug coverage for Medicare-eligible Postal Service annuitants and their Medicare-eligible family members through a Medicare Part D plan. The new PSHB Program goes into effect in 2025. The Inflation Reduction Act redesigned the Medicare Part D benefit in the following ways:  

• Starting in 2023, the IRA sets a $35 cap on the cost of insulin products and waives cost-sharing for Part D adult vaccines that are recommended by the Advisory Committee on Immunization Practices.  
• Beginning in 2024, the IRA eliminates the 5% coinsurance for Part D catastrophic coverage and expands income eligibility for the low-income subsidy to 150% of the Federal poverty level (FPL).  
• Starting in 2025, there will be a $2,000 cap on a Part D enrollee’s out-of-pocket spending and a Part D enrollee may spread their out-of-pocket costs over the year.  
• From 2024 through 2030, average basic Part D premium growth is capped at 6% per year. 

In Carrier Letter 2023-04, OPM stated they would entertain proposals featuring automatic group enrollment for PDP EGWPs. OPM noted that plans making such a proposal should provide a seamless, customer-friendly approach to allowing the affected members to opt out of the enhanced Medicare product if they choose. 

For Plan Year 2025, OPM will continue to accept proposals from FEHB Carriers that feature automatic group enrollment for PDP EGWPs. Eligible FEHB members who are auto enrolled may opt out, as FEHB members are not required to enroll in Medicare Part D. OPM stated that FEHB Program members for whom Medicare is primary must receive drug coverage equal to or greater than the drug coverage they would have received without MA-PD EGWP or PDP EGWP. 

FEHB annuitants enrolled in an EGWP must have formulary access to all drugs covered under the corresponding FEHB formulary at the same or lower cost-share than they would have otherwise been responsible for if they enrolled solely in the FEHB plan. 

This sounds reasonable, and it seems like a good idea for OPM to encourage FEHB carriers to begin offering Part D coverage to provide better prescription drug coverage at a lower cost for federal retirees eligible for Medicare. 

However, many (maybe most?) of those retirees who were auto-enrolled did not see this as an opportunity to have better prescription coverage and they didn’t see how they would save money on prescriptions. This was evidenced by the many emails the National Active and Retired Federal Employees Association received once the retirees were informed of their new drug plan. Here are a few of the comments: 

• How does one opt out? I don't trust this plan.   
• It really bothers me that my FEHB plan is trying to coerce everyone who is on Medicare into this program when it is probably costing most people more for the drugs that they actually use.    
• Due to the Income Related Monthly Adjustment Amounts (IRMAA), I also did the math and would be spending more than I'm saving under the new Medicare Part D with Blue Cross. Therefore, I want to opt out.   

Now that it has been almost five months since Part D has been incorporated in many FEHB plans, how is it being received by those who did not elect to opt out? I guess like most things, when things are doing good, we stay quiet and if things are going bad, we make more noise. I am having difficulty finding positive comments, so I will add one of my own: 

My husband and I were auto-enrolled in a Medicare Rx plan as were many federal retirees and their spouses who are over age 65. The benefit we have noticed so far is that the generic medications we have filled this year have a $0 copay compared to the $6 that we paid in 2023.  Another difference is that our health plan (Aetna Direct N61, N62, N63) has an $1,800 health fund ($900 / person), which we can now use to reimburse some of our Part B premium.  Last year, our drug copays were deducted from this fund, however when enrolled in a Medicare drug plan, this is no longer how it works. Under the Medicare Part D coverage, any drug copays would be paid out of pocket and not deducted from this fund. Since we are paying an IRMAA (Income Related Monthly Adjustment Amount) surcharge to be enrolled in this Medicare Part D plan, we may decide to opt out since we aren’t currently saving as much as we are paying for the plan since we fortunately don’t fill many prescriptions. If that changes, I can see where this plan could provide substantial savings. It should be noted that there is no premium for the Part D coverage provided through FEHB plans unless you are impacted by IRMAA and your modified adjusted gross income is above $103,000 for single filers and $206,000 for those filing a joint tax return. 

If you decide to opt out of PDP coverage because of IRMAA or any other reason, you can enroll into a PDP in the future, without penalty, as FEHB prescription drug is considered creditable coverage by OPM. Contact your FEHB plan or visit the plan website for information on opting out of the Medicare Part D Prescription Drug Plan. If you are enrolled in a Medicare Advantage option through your FEHB carrier, Part D is generally included and to opt out of Part D would require that you opt out of the Medicare Advantage option.   

Note: A Medicare Advantage Plan (like an HMO or PPO) is another Medicare health plan choice you may have as part of Medicare. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are offered by private companies approved by Medicare. If you join a Medicare Advantage Plan, it will provide all your Part A (Hospital Insurance) and Part B (Medical Insurance) coverage. Medicare Advantage Plans may offer extra coverage, including vision, hearing, dental, and/or health and wellness programs. Most include Medicare prescription drug coverage (Part D). Many FEHB plans now offer a Medicare Part C / Medicare Advantage plan option.